Hedge funds 'need to ditch $200bn to complete de-leveraging'

26 November 2008

Hedge funds may still have to dump around $200 billion worth of assets in order to fully "de-leverage" themselves and cut out their use of borrowed funding, it has been claimed.

Adam Parker, an analyst at New York-based fund manager Sanford C Bernstein, wrote in a note to clients that interviews with more than 65 hedge fund managers indicate that more asset sales are needed to raise cash in the sector as investors flee, Money Morning said.

Last month, around $40 billion was pulled from the $1.5 trillion hedge fund industry, the site said, citing a report from Hedge Fund Research.

Hedge funds use leverage to boost trading profits, the site noted, but in recent months, the financial crisis has forced many to sell-off assets in order to meet tighter lending requirements and client payouts.

In Sanford C Bernstein's own poll, 63 per cent of fund managers said de-leveraging through asset sales is halfway complete. A further 23 per cent said they are three-quarters of the way there.

Founded in 1967, Sanford C Bernstein now manages around $85 billion worth of investments.

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