The great unravelling goes on. Hedge fund clients pulled out $74bn in January, according to TrimTabs – the second highest withdrawal on record behind December’s $117bn. Some funds that froze redemptions in panic last year are now relenting: Fortress, Tudor and Threadneedle are reported to be following Citadel’s lead in allowing investors access to their cash when they want it.
That is brave: after a rare up month for the industry in January, February could prove to have been as grotty as November and December. But relaxing defensive restrictions is the right decision – for two reasons. First, it acknowledges that the industry is built on mismatched liquidity. Consider the banks financing hedges through their prime brokerage arms – a lot of that funding is overnight, and the remainder can be clawed back, if necessary, in a hurry. Funds of funds, guardians of perhaps 30 per cent of total industry assets under management, might invest in a fund on a quarterly basis while offering their own investors monthly terms.
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