Redemptions: Is there a cure for redemption fever?
According to press reports, Polygon Investment Partners, an $8 billion UK hedge fund, is changing its redemption system in a bid to slow investor withdrawals. The fund, which had lost 4% by the end of March, operates a first-come, first-served redemption system that limits the amount of withdrawals at any particular time. But management reportedly claims that this has resulted in investors applying to withdraw money in a bid to be first out of the gate, simply to avoid being caught last if the fund were to get into serious trouble.
As an alternative, the fund is offering investors the opportunity to move to a new class of shares that will not have a gate, say the reports.
Calls to Paragon were not returned.
It’s not a new strategy. Ritchie Capital tried to apply a move to a new class of shares to slow its redemptions and appease investors when it was facing substantial losses in some of its funds.