Some hedge fund customers are getting their money back by selling their shares on the secondary market, Dow Jones reports. Hedge funds see this as an alternative to locking up customers money through so-called gates.
With lock-up periods lasting several years in some cases, the secondary market for trading hedge fund shares developed a number of years ago. But those trades were few and far between, until recently. And with the markets so poor, some purchasers are getting hedge funds to waive their fees until their numbers are back in the black.
Managers are getting more acclimated to allowing [secondary market trading] to happen because there really isnt any downside risk unless the money is flowing from strong, stable hands to weak hands, said Charles Gradante, co-founded of hedge fund advisor Hennessee Group.
Many of the purchasers on the secondary market are hedge funds-of-funds, but in recent years, pension funds and high-net-worth individuals have also come into play.