dChan - Q Origins Project Archive

Multi Billion $ Hedge Fund Blocks Redemptions

This is the first major one this year and is a sure sign the system is not able to fund itself any longer.

This was a feature of the run-up to the 2008 event, and on a much larger scale-you can bet there will be moar.

In a moment of financial serendipity, earlier today we tweeted that as a result of the sudden collapse in the market's most crowded positions (which as we noted over the weekend, now face the biggest risk of a wipe out), "hedge fund redemption requests re-emerge."

Financial Times reported that Neil Woodford, the UK's equivalent of David Tepper, has blocked redemptions from his £3.7bn equity income fund after serial under-performance led to an investor exodus, "inflicting a serious blow to the reputation of the UK’s highest-profile fund manager."

The freeze on redemptions, follows a steady stream of investor outflows, which have occurred each month for two years, with the fund shrinking by two-thirds to £3.7bn since a peak of £10.2bn in May 2017.

The severity of this latest hit to the hedge fund industry can not be underscored enough.

The freeze, also known as a redemption gate, which usually is implemented during times of market turmoil to avoid a catastrophic liquidation of assets as investors panic, was introduced after Kent County Council, a longstanding backer of Woodford since his days as a star fund manager at Invesco Perpetual, asked for the return of approximately £250 million.

they are NOT worried about people giving them money, this is ALL about taking it out-hence it is called a redemption gate.'

In a statement, Woodford Investment Management said it had “come to the conclusion it is in the best interests of all investors in the fund to suspend the issue, cancellation, sale, redemption and transfer of shares in the fund”. It also said it was taking the step to “protect the investors in the fund” by giving Woodford time to sell unlisted and illiquid stocks and buy more liquid investments that could be sold to meet redemptions.

Adding insult to injury, the shares of construction group Kier, one of the fund’s main holdings, plunged 40% after a profit warning on Monday.

What it really meant is that it was on the verge of collapse and any further redemptions would merely accelerate the fund's liquidation, resulting in a potentially systemic collapse.

The gating of the fund is reminiscent of the action taken by UK property funds in the wake of the UK’s Brexit vote, when funds - including Standard Life - froze redemptions to stem the exodus of money.

Speaking of the UK's top financial regulator, the FCA said it was “aware of this situation and in contact with the firms involved to ensure that actions undertaken are in the best interests of all the fund’s investors”.

It said it was taking the step to “protect the investors in the fund” by giving Woodford time to sell unlisted and illiquid stocks and buy more liquid investments that could be sold to meet redemptions.

Woodfore's fund said it would write to investors when dealing was to be resumed and keep them informed “about the suspension, including its likely duration”.

Last week, the Financial Times revealed that Woodford’s flagship equity income fund shrank by £560 million in less than four weeks.

The company has also undertaken a series of complex deals in order to reduce the balance of illiquid, unquoted holdings in his open-ended funds, which have proved contentious as investors have tried to exit the vehicle.

Worse, with investors now barred from pulling their money from one of the largest funds, they will now scramble to redeem whatever they still have access to, creating a toxic spiral which likely culminate with the fund's termination.

The company is also in talks with the UK financial regulator.

But what is most bizarre about this latest hedge fund fiasco is that the gating takes place with global markets still just shy of all time highs. One can only imagine what will happen to the rest of the sector if the current swoon accelerates and drops another 5%, 10% or more, sending other hedge funds scrambling to liquidate their own holdings of the most crowded stocks. Those who succeed to sell first, they just may survive to fight another day.

https://www.zerohedge.com/news/2019-06-03/it-begins-multi-billion-hedge-fund-blocks-redemptions

>>6664723

Baker, the ZH story is reporting on the funds being gated in a hedge fund. This is the mechanism that they are using to set it off but it's not wrong in what it's reporting. ZH gas-lights a lot but it's the actual habbening that should be focused on. People who hold accounts here will be barred from taking the money out while these ass-hats get to sell whatever they want and basically take the money and run while the customer's get nothing moar than a piece of paper they cannot "cash in".

See MF Global for an example of customer accounts being stolen. Former Gov o New Jersey was placed in the CEO role at MF Gloabl-comm broker and they looted customer accounts during the rise in silver from 2009 to the fake capture of bin laden.

It's all a ply to separate money from client's and it's a bit disingenuous to frame it simply as ZH saying it's going to crash yet again. Because they do that a lot.