Madoff’s clients weren’t the only ones clamoring for their money back. Many hedge funds – even some that have done relatively done well amid the market’s meltdown, are seeing investors flee in droves. So some funds are trying to staunch the outflows by limiting the amount money investors can withdraw at one time.
Morning Call: December 15
The game ended for Bernard L. Madoff when some of his investors finally asked for their money back. He did not have it, and his suspected Ponzi scheme collapsed.
But many other money managers — ones who, unlike Mr. Madoff, have not been accused of wrongdoing — confront a similar problem. Their investors are racing for the exits too, and the managers are struggling to cope with the rush.
A growing number of hedge funds are trying to slow the exodus, because that could force them to dump investments into already shaky markets. They are temporarily preventing clients from withdrawing a lot of money at once, a practice known as gating.
But investors are not merely fleeing funds that have done poorly. Many are exiting funds that have done well in order to cover losses on their other investments.
“We have become the A.T.M. machines for people that need cash,” said George Weiss, who heads a $3 billion hedge fund. Mr. Weiss, who has been a hedge fund manager for 20 years, said that his fund was down about 7.5 percent so far this year — far less than the broad stock market. Even so, his investors have withdrawn about 35 percent of their money.
Trader Daily � “Gating” Grating for Hedge Fund Investors