Banking

Accounting, Financial Reporting, and Risk Management Issues Associated With Hedge Fund Restructuring

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Executive Summary

After the market events in the third quarter of 2008, many hedge funds received redemption requests which, had they been honored, would have significantly impaired the capital base of many open ended hedge funds. This situation was exacerbated, in many cases, by funds that impose gates, or limitations of the amount of capital that can be withdrawn from a fund at a given redemption date (often quarterly, but in some cases monthly). The fear of a gate being shut caused many investors - themselves in need of liquidity - to request redemptions to assure their place in line should the gate come down.

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