CNNMoney.com- Some hedge funds with heavy exposure to complicated, often illiquid securities likely are in for a rough ride in the next few months if investors take out their money.<\/p>\n
Many funds’ returns have suffered. Heavy redemptions can deepen losses. The size of any exodus won’t be clear until Sept. 30, the deadline for paying August redemptions.<\/p>\n
Some shareholders probably will bail if their funds are hurt by hard-to-price securities. That can make those securities less liquid. Many are linked to the subprime mortgage market.<\/p>\n
The average hedge fund was up 0.37% in July, according to Hedgefund.net, which tracks almost 3,500 funds. That left them up 7.74% for the year. That beat the S&P 500 index, which returned 3.64%.<\/p>\n
But funds whose strategies focused on the finance sector — 37 funds — fell an average of 3.88%. That was the worst of all sectors HFN tracks. It left that sector down 5.21% for the year.<\/p>\n
Meanwhile, hedge funds that invested in the mortgage sector soared 13.07% on average in July.<\/p>\n