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Benedicte Gravrand, Opalesque London:
Following the hedge fund industry' 2008 tale of dwindling assets, hurried redemptions and forced lock-ups, its secondary-market, which allows investors to sell stakes in funds or to get into funds that are closed, actually swelled. But this market is not without its intrinsic problems, be they demand and supply imbalances, compliance issues or valuations.
During the liquidity crisis, many hedge funds were forced to restrict the liquidity offered in their funds. Investors in need of liquidity had little option but to turn to the secondary market. Since then hedge funds secondary markets - where participants trade their shares OTC most often through the intermediation of brokers - enjoyed a dramatic expansion.
The volume of trading on the secondary market reached a YTD high in March-10, according to Hedgebay Trading, a Bahamas-based secondary market maker. The Hedgebay Secondary Market Index showed repeats of February's premium trade, the first in nearly two years, confirming investors' eagerness to seek out quality hedge fund assets. The firm also attributed the higher volume to the continuous focus on portfolio clean-up, which started last year (see Opalesque Exclusive here).
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