Preferential Hedge Fund Redemptions

Are hedge funds giving certain clients preferential treatment with regard to redemptions?

SEC Commissioner Elisse Walter believes some funds have done so. “Principals, employees or favored investors of the hedge-fund adviser may have received ‘preferential redemptions’ from the fund at issue.” Walter said in testimony to the House Financial Services Committee today.

More than 1/6 of hedge funds are halting redemptions, limiting withdrawals from certain funds, or altering their redemption schedule.

The SEC is also zeroing in on trading irregularities and lack of due dilligence by feeder funds, such as those that gave money to Bernard Madoff. The SEC claims to be developing new "technological tools" to deal with trading issues such as insider trading and front running.

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