On the rocks - US insolvency court decisions and their impact on the UK hedge fund community
In the light of recent funds very publicly hitting the rocks, Addleshaw Goddard's Louise Verrill and Roger Laville discuss some of the considerations which apply when hedge funds become insolvent and explore the implications for the United Kingdom of recent United States court decisions.
One of the selling points of the hedge fund is that it can appreciate in value even in a falling market.
By using a range of investment tools such as short sales and derivatives, including futures, options and credit default swaps, managers say they can bid against the indices and make money even in a downturn.
This may be true in normal market conditions, but recent experience shows that when the entire market is falling sharply, even hedge funds can struggle to make money.
This should not be
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