Friday could be another wild day in the markets as it's the last trading day of the month and of the quarter. It's also a deadline for investors in many hedge funds to say whether they want to pull their money out of the funds, according to Dow Jones Newswires.
Man Group PLC, the world's largest hedge fund, tumbled 25 per cent on the London Stock Exchange Wednesday after reporting $2.6-billion (U.S.) in net redemptions by investors in the latest quarter, and warning that "investor appetite will remain suppressed for the remainder of the year."
Fund redemptions were a key feature of the wildly volatile markets during the 2008 credit crisis. Fund managers were often forced to liquidate holdings in order to raise the cash needed to pay back nervous investors who wanted to pull their money out, triggering deep selloffs in equities and other asset classes - often near the month-end, when the redemption obligations had to be met.
If other hedge funds are feeling the same pinch Man is, and haven't already raised the cash they need over the past week, we may see significant selling pressure Friday - which would put a suitable punctuation mark on what has been a miserable quarter. The S&P/TSX composite index is on course for a 12.5 per cent decline in the three months ending tomorrow, the biggest quarterly drop since the fourth quarter of 2008.