Hedge Funds have never had a year this bad, and it's getting worse. Investors are pulling so much money from the once-prized investment vehicles, the Wall Street Journal reports, that redemptions are expected to claim 25% to 40% of hedge fund assets by March 2009. Add investment losses, and assets are expected to be down 50% from their peak by the middle of next year, forcing many funds to shut down.
“A lot of hedge funds are in survival mode trying to ride the year out,” says the president of a fund services firm. Some are limiting or even suspending withdrawals, while others restructure to avoid the kind of sudden forced stock liquidations that can punish the volatile market. But stopping the bleeding has become an all-consuming task. “Hedge funds are not in a great position to put money to work,” concludes a Citigroup report.