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12/4/07
Hedge Fund Redemptions
After investing in hedge funds some accredited investors have amuch harder time getting their money out of a hedge fund then into them. Whilethis is often preventable it is usually the result of:
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Preset lockup periods where investors must keep their money in the fundfor a minimum of 6 months to 3 years depending on the fund mandate butnegotiable
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The liquidity of the asset classes the hedge fund deals with. Some hedgefunds work in such illiquid markets that they will have redemption clausesin their contracts that allow them to wait 3-12 months for more liquidmarkets before being forced to sell a position.
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Arbitration. The process of going through arbitration and looking at whichfunds have been through it before can vary widely and be difficult. While adefinate exception to the rule if you get invested with a rogue hedge fundmanager you might have to chase them through arbitration or other legalmeans to redeem your initial investment.All of this lends to making sure you have your investment goals and expectationsclearly defined so they can included in research a hedge fund consultant does for you and so you can just keep these extra thing in mind while doing researchyourself. Many hedge funds do not have lockup periods of more than 3-6 monthsand the majority work in relatively liquid markets. As the Financial Times put it,"The salutary lesson for those wanting to invest directly in hedge funds is that,
Richard Wilson Hedge Fund Blog503.789.7901Richard@RichardCWilson.com
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