The side pocket predicament


Administrators worry about valuations, redemptions and making sure best practices are followed by fund clients

By Barry Cohen

Investors' worst fears about side pockets were realized last year after troubles surfaced at Ritchie Capital Management, the multibillion-dollar multistrategy hedge fund that began a bumpy decline in August 2005. At that time, Ritchie asked investors to agree to a side pocket, allegedly to hold its less liquid investments as the firm moved into private equity. A few months later, however, investors were furious to find out that the fund's dogs were being cordoned off into the side pocket - a segregated