Are we heading for another hedge fund crisis?

HEDGE FUNDS

Lessons learned from 2008 should go some way towards protecting investors from another hedge fund crisis in the current market turmoil.

A significant casualty of 2008’s financial crisis, funds in the hedge fund sector declined by an average of 19%. But the sector’s performance was not the only thing hit: investors’ trust in the space plummeted too. The aftermath of Lehman’s collapse saw many funds gate their investors and suspend redemptions, creating big side pockets of illiquid investment. It was not uncommon for those who had invested a lot of money on the basis they could redeem it with a quarter’s notice, being told, when they, asked for it, that the fund would in fact be closed. “Although always a possibility, p...