Recs
October 24, 2008 – Comments (2) | RELATED TICKERS: DVY , NDAQ , SPY
When is the general time period (i.e. after Christmas) or day (December 31) that Hedge Funds would have to sell thier positions for redemptions?
Not sure you can be given such a date. I don't know a lot about hedge funds, but for a regular stock, the SEC says that a transaction has to officially complete within three trading days. In a mutual fund, and probably most hedge funds, you will tend to have some cash in the fund due to incoming money and the lag between selling something and using the money to buy something else. Redemptions can be paid out of the available cash first, so to answer your question you would first need to know how much cash the fund has on had to pay the redeemers before it needs to sell more assets.
As a general rule, if people want to lock in a tax loss for the year, they would need to put in their sell orders around Dec. 26th at the latest to make sure that there would be potentially three trading days left for the transaction to clear. (I haven't looked at a calendar so I don't know when the weekends fall after Christmas, so you might need to pick an earlier day as the worst-case selling day.) Since a lot of the trading days around Christmas and New Years are shortened days with light volume, most people would probably choose an earlier day to do their selling. (They don't want to have to call their broker when they are just about to sit down for Christmas dinner.) Therefore, as a guess, I would say that you would probably see a lot of redemption calls starting around Dec. 21st, (or the closest trading day to that date). This is a guess on my part but I think it is a fairly solid one. Hope that helps.
Craig
Wow that was packed with good info. Thanks a lot for your answer Craig, I appreciate it.
View More
Terms & Conditions
RSS Headlines
Fool UK