Chidem Kurdas
Even as markets and hedge fund returns recovered from the crisis of 2008, some managers continued to keep hard-to-sell assets in separate portfolios that have restricted redemption. The practice was initially a response to extraordinary circumstances but persisted largely because managers believe they can salvage losing investments if given more time.
Side pockets limit withdrawals by investors while the agreed-upon redemption conditions still apply to the assets in the fund proper. Thus some of Perry Capital’s investments were moved to side pockets after losses in 2008. The losses came in part from Perry’s trades in Porsche’s attempted takeover of Volkswagen. (more…)
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