New York Times – Hedge funds’ annus horribilis is getting worse. The average fund, after losing nearly 5 percent in the first eight months of the year, was down an additional 7 percent in September, according to Hedge Fund Research. Many other factors are making life difficult for fund managers, too. An industry shakeout looks inevitable.<\/p>\n
At the end of last month, many funds were expecting more than the usual level of requests from jittery investors to pull cash out. It’s hard to plan longer-term trades if your investment funds might suddenly be snatched away. And a flood of redemptions can force the sale of assets, hurting remaining investors — one reason that fund managers sometimes block withdrawals.<\/p>\n
On top of that, hedge funds used to bolster returns with lots of borrowed money. Now that has become a scarce commodity. The ability to bet on price declines has also suffered, thanks to partial or complete bans on selling stocks short in markets around the world. <\/p>\n