Hedge funds are experiencing record redemptions as investors move to more liquid investment options. Investors moved 20% of their assets out of hedge funds last year as total hedge fund assets shrank nearly $800B to $1.2T. Many of the largest funds such as Citadel were forced to cancel redemption requests as the overflow of funds threatened the stability of the funds. Much of the end of days panics during Q4 2008 were due to end of day hedge fund selling.
Many of the large funds such as Cerberus and Citadel have just recently continued fulfilling redemption requests. Redemptions were up $74B in January across the industry. As the market downturn worsens and hedge funds continue to redeem shares it’s likely that we’ll continue to see a heavy amount of selling in the market.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.