Hedge-Fund Exodus May Add to Woes

Hedge funds are bracing for a major test of wills tomorrow, the deadline for investors to withdraw from the funds for the rest of the year, the New York Times reports. A spate of withdrawals could cause a cascade of flight from the $2 trillion industry, which has seen its worst year ever, with the average fund down 10%.

Even a moderate flow of redemptions could force funds to sell investments to pay off exiting shareholders. Some 350 hedge funds already have felt the pinprick of the deflating economy, liquidating their assets in the first half of this year, and the industry has set aside $600 billion in reserves because of the chaos in the economy. (More hedge funds stories.)