*how does this affect the stock market? Hedge funds have to sell assets in order to pay cash to outgoing investors. Last years decline was largely fueled by margin calls and investors leaving in droves and demanding their money back. You have to sell gold and oil, hard assets, in order to get enough cash on hand to pay for redemptions. Cerberus is not the first to disclose this. Expect a repeat, albeit not cascading.
- Investors in hedge funds run by Cerberus Capital Management LP, whose audacious multi-billion dollar bet on the U.S. auto industry went bust, are bolting for the door, clinching one of the highest-profile falls from grace of a superstar in the investment world. Clients are withdrawing more than $5.5 billion, or nearly 71% of the hedge fund assets, in response to big investment losses and their own need for cash, according to people familiar with the matter. wsj.com