0
$\begingroup$

Let's say that I'm an investor in a hedge fund, a recession just hit and I need cash asap. But the hedge fund either has infrequent redemption, or it locks my fund in, until the market gets better and they can liquidate the assets at a better price.

If I need money, can I securitize my position at the fund? So i can either sell that as an asset at a discount or use it as a collateral.

$\endgroup$
  • $\begingroup$ “Securitise” means that you are issuing a creating an entity with assets that then sells securities in the public markets. It seems extremely unlikely that this would be possible, and such a security would be of little interest to investors. Whether hedge fund holdings can be used as collateral or transferred is a question securities law. $\endgroup$ – Brian Romanchuk Jun 16 at 0:00
  • 1
    $\begingroup$ You may find quant.stackexchange.com to be more suitable for your questions. $\endgroup$ – Kenny LJ Jun 16 at 0:46
2
$\begingroup$

Actual securitization would be impractical for a number of reasons, but secondary market transactions of shares in hedge funds do occur with the consent of the funds in question (though it’s not a particularly liquid market). Using these shares as collateral would not generally be practical, as they’re not assignable interests.

| improve this answer | |
$\endgroup$
  • $\begingroup$ According to the linked article, secondary limited partner trading "...has now become a widely accepted practice..." in the HF community, implying that it is somewhat liquid(?). $\endgroup$ – Michael Jun 16 at 3:39
  • 1
    $\begingroup$ @Michael The context there is that it’s “widely accepted” in the sense that it’s not considered as much of a black mark on the HF manager to have a client drop them in this manner. If you read a bit further into the article, you’ll note several references to it being illiquid. This is a market that involves essentially bespoke matching between buyers and sellers— a transaction that takes only weeks is basically a best-case scenario. $\endgroup$ – dismalscience Jun 16 at 11:35

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.