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March 11, 2008

Hedge funds suffer at banks’ hands

by Richard Kilner

Story link: Hedge funds suffer at banks’ hands

The worldwide financial crisis has created the worst market conditions for hedge funds for 10 years.

Banks, suffering from the substantial financial hangover from the subprime mortgage crisis, have begun requiring that hedge funds provide greater amounts of money pledged to support loans.

The approach of banks has become so cautious that even rock solid loans, supported by the US itself, are subject to the new requirements.

As a result of the more stringent approach half a dozen such funds worth several billion dollars combined have been compelled to dump assets to cope with the soaring costs of borrowing.

The situation is quite unusual, because instead of consumers fearing for the safety of their money it is the banks themselves concerned with getting their money back.

In the near future hedge funds will see little relief from the situation as banks maintain their cautious approach.

 

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