Yesterday, i.e. 15th November, 2008 was the last day for thousands of hedge fund investors to intimate their respective hedge fund managers to redeem their investments in respective hedge funds.

Now, hedge funds typically require either a 3 months or 45 days notice from its investors who want to exit the investment pool. Now, there are hedge funds that allow investors to give even lesser notice before taking their money out. For hedge funds that required three months notice from investors who wanted to exit had a similar deadline on September 30. Yesterday was the deadline for hedge funds that require 45 days notice.

Since the last deadline i.e. 30th September, 2008 we saw the carnage that took place in markets worldwide. Agreed that there is no formal study to link the tremendous fall in equity indices and the pull - out from hedge funds. But considering the size of hedge fund industry, estimated to be around $ 17 trillion, they certainly do carry some clout. It will be interesting to see how things pan out in the following weeks. Larger than expected redemption requests could see another round of selling.

According to George Soros, hedge fund industry is expected to witness a shrinkage in its assets to the tune of 50 - 75%.

I had in one of my earlier posts talked about how some institutional investors have to meet asset allocation targets i.e. they specify a fixed % of their assets which is to be invested in stocks, bonds etc. Now, with the fall in equity prices the aforementioned asset allocation has gone for a toss. To readjust their portfolios they might want to buy more of equities and that is exactly how things seemed to have panned out with equity markets recovering in the first week of November on the back of buying by these institutional investors.

According to sources, some hedge funds are sitting on cash in anticipation of meeting investor redemption requests. But some other hedge funds have not planned as well may be forced sellers, putting more pressure on an beaten down market.

In light of the above one would do well to wait and watch. There is no need to be in a hurry. I feel markets are going to take their own time recover and bounce back.