The entire sector has been devastated by the financial crisis. The credit crunch has curtailed the ability of funds to borrow. Regulators have imposed restrictions on short-selling of financial stocks. And the opaque nature of hedge funds’ operations is likely to spur investors to withdraw money, because of the difficulty of distinguishing legitimate operations from crooked ones. If hedge funds start liquidating assets to meet investors’ desire for cash, then the financial markets will experience further turmoil.
From a leader in ‘The Times’, London
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