Michael E. Lewitt, president, Harch Capital
In 2008, the hedge fund industry hit a wall. Many funds not
only lost money for their investors; they compounded their
miscues by mistreating their investors by refusing to return
their funds, or returning those funds in kind.
In funds heavily invested in illiquid assets, temporary
delays in returning investor funds in order to effect a managed
liquidation of assets may well be the best course of action for
all of the investors in the fund, both those who are exiting
and those who are staying behind. But many funds holding liquid
assets also availed themselves of the general market meltdown
to block investors from leaving. And adding insult to injury,
managers of all types of funds that prevented investors from
exiting continued to charge fees on this trapped money. This
was probably the worst sin committed by managers in...