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Hedge Fund Selloffs Behind Swooning Dow

Investors cashing out in record numbers to meet obligations
By Clay Dillow,  Newser Staff
Posted Nov 7, 2008 9:25 AM CST

(Newser) – Hedge funds are increasingly to blame for the swooning Dow, the Wall Street Journal reports, as demands from investors to withdraw funds have sparked a securities selling frenzy in recent days. The rush to withdraw comes as investors—endowments and  pension funds as well as wealthy individuals—see other investments shrink and need cash to cover their obligations.

The result is a self-feeding cycle in which hedge funds dump thinly-traded securities to cover redemptions, driving down markets and begetting more redemption requests from panicky investors. Some $4.28 billion worth of corporate debt has been put up for sale in the last month.
(Read more financial crisis stories.)

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