Learning to Love the Secondary Market

Hedge fund managers haven’t always embraced the fast-growing market for trading hedge fund stakes. But observers say that managers should rethink long-held attitudes and embrace it as a source of long-term capital.

The continuing economic uncertainty hanging over the markets has left risk-averse investors feeling less patient than ever with asset managers who aren’t delivering the goods. Take Paulson & Co. The firm, founded by John Paulson, grew enormously popular with investors after making billions shorting the subprime market, but after posting double-digit losses in its flagship Advantage funds for two years in a row, some investors have gotten frustrated and are looking to cash out.

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