New York (HedgeCo.net) – Over the last eight years, there is a trend taking place within the hedge fund industry that might not be sustainable. According to a Barclays’ capital solutions group study, the trend within the hedge fund industry has been to shorten the amount of time between when an investor request a redemption and the time it takes to get their money.

The problem with this trend is that runs counter to what hedge funds have increased their allocations in and that is investments that are more difficult to liquidate. These two trends could lead to a disaster.

We got a glimpse of what can happen when hedge funds get caught in a position of not being able to liquidate positions effectively in the high-yield bond market during December. As a recent Business Insider article pointed out how the high-yield market tanked when high-yield mutual fund Third Avenue announced that it closing is Focused Credit Fund and placed a freeze on redemptions in order to liquidate assets in a more orderly fashion. The action made a huge impact in the high-yield market as other investors became concerned about the liquidity in the market.

If hedge funds continue to shorten their redemption periods while continuing to invest in less liquid investments, there could be a disaster looming down the road.