June 16, 2006
Illiquid assets cause valuation problems for hedge funds
Private equity has become the next big thing for hedge funds; only problem is that they are facing problems over the valuation of these new investments. The problem lies with a new Securities and Exchange Commission rules that requires hedge fund managers to register for the first time. Marketwatch.com reports:
Managers that prohibit investors from redeeming capital within two years are exempt from the rule and a number of hedge funds have used the lock-up process to escape registration. As a result, the number of hedge funds carving an illiquid asset out of an existing fund tying up investors' money for a period of several years - referred to as a side-pocket - has risen dramatically over the last few years.
Read more: Hedge fund hybrids face valuation snag on illiquid assets
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