Hedge funds having an edgy year

NEW YORK, Sept. 29 (UPI) -- The $2 trillion hedge fund market is headed for its worst year on record, various industry watchdog groups said.

Hedge Fund Research said the average hedge fund is down nearly 10 percent this year, The New York Times reported Monday. In addition, although hedge funds fail routinely, about 350 closed in the first half of 2008, a liquidation rate 24 percent higher than last year, the Times said.

As leaders in Washington vote on a $700 bailout plan for financial firms this week, Tuesday is a critical day for hedge funds, with many scheduled to permit investors to submit withdrawal requests on that day, the Times said.

"There could be a cascading effect, where redemptions cause other redemptions," James McKee, director of hedge fund research at Callan Associates, told the Times.

Not everyone believes the hedge fund market is in dire straights.

"It's clearly been a very tough year for investors in general. But I think hedge funds have done a good job of navigating very tough markets and don't get the type of recognition that they should," said David Smith, chief executive officer of Coast Asset Management in Santa Monica, Calif., said to the newspaper.