Hedge funds growth prospects hit by Lehmans demise

Date: Wednesday, September 17, 2008
Author: Anuj Gangahar in New York, FT.com

The future growth prospects for the almost $2,000bn global hedge fund market are in doubt as funds are being forced to de-lever and sit on large cash balances as a result of the severe pressure on the prime brokers they largely depend on for financing.

The collapse of Bear Stearns and Lehman Brothers has forced hundreds of hedge funds that used them as their prime brokers to look elsewhere for their funding and operational support but also put pressure on funds to rein in the amount of leverage they employ, thereby limiting their ability to outperform broader indices and causing investors to question the fees they charge