It seems like just last year that individual investors without seven figure incomes were trying with little success to get into hedge funds. Today, they can't get out of them. In an article in today's WSJ, Greg Zuckerman highlights that in addition to institutions and the wealthy, smaller investors are finding that requests for withdrawals are being refused as funds institute their lock-up policies. It's also probably safe to assume that given their large asset pools in the line for the exits, the institutions and the clients with the most assets will be the 'women and children', while the smaller investors will be the most likely to go down with the ship while paying management fees to the bitter end.
Whether it's the above example of hedge funds, the lock up of the Auction Rate Securities (ARS) market, or the issue we cited with the ETF DCR yesterday, when presented with an investment opportunity, investors should know not only what they are investing in, but also understand what limits they will have on their funds.
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