Illiquid hedges

3 November 2008 By Hugo Dixon

One of the advantages of hedge funds compared to private equity was supposed to be that you could get your money out when you needed it. But the current crisis shows that, when push comes to shove, you can t. In future, investors should demand an illiquidity premium.

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On November 3, Polygon, the hedge fund group, said it suspended redemptions in its flagship $4bn Global Opportunities multistrategy fund. That same day, hedge fund Blue Mountain froze its $3.1bn Credit Alternatives Fund.

RAB Capital, the London based hedge fund, told investors in its Energy fund they would not be able to liquidate their holdings on October 26.

Centaurus Capital, the London based hedge fund, is proposing to return 30% of cash to investors in its Alpha fund and lock up the rest of the money for two years with reduced fees. In the mean time, Centaurus is restricting the amount of money investors can withdraw to 10%.

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