Tuesday, August 14, 2007

Redemption Problems

Investors with money in hedge funds who want to bail out by September 30 must tell their hedge funds by tomorrow, August 15, that they want out. There are some fears that requests for redemptions will reach panic levels because of the recent subprime mortgage mess and some funds may not have the money to honor redemption requests.

So far, we have not heard about any hedge funds putting a halt to redemption requests because of liquidity problems, but CNBC is reporting that a money market fund, Sentinel Management Group, has put a halt to redemptions because of "problems in the commercial paper market." Sentinel says it cannot honor requests for redemptions without causing big losses to investors.

The market, down even before the Sentinel news, dropped even more after CNBC reported it.

Let's see if this is the start of a panic or just a blip.

Right now, even the shilliest of the shills on CNBC sound concerned about the news.

UPDATE: Here's the letter Sentinel sent out to its clients about the halt in redemptions:

If money marktet funds are going to start taking hits as a result of the subprime mess, than we're really in trouble.

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