Trapped in a deleveraging spiral
One of the biggest seismic shifts in 2008 was away from leverage. Easy credit has gone for good. Hedge Funds Review examines what options hedge funds have now that the easy credit has dried up
In the days of easy credit, hedge funds loaded up on leverage in pursuit of higher returns. Now the money has largely dried up, and hedge fund managers have been forced to sell assets to meet margin calls from prime brokers and repay investors who were themselves leveraged.
Deleveraging has been a painful experience for many hedge funds. The process has been feeding on itself, as forced sales have depressed asset values and prompted further margin calls and redemption requests.
Neill Ebers
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