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When Will Hedge Funds Stop Selling

It’s widely believed that forced selling from hedge funds led to Thursday’s market drop. But that might be changing.

Another fund has thrown down the gate so to speak. This time it's Fortress Investment Group, that has suspended redemptions.

One of only a small number of publicly traded hedge fund and private equity groups, Fortress said its board of directors unanimously agreed to temporarily suspend pending redemptions after investors asked to pull out roughly $3.51 billion by year's end from its Drawbridge funds.

Suspending redemptions was once a sign that a fund was about to fail, but it is now a much more accepted tool to safeguard capital -- for a while at least – and managers are no longer ashamed to say they aren't letting investors out just yet.

Of course Fortress is hardly alone. Just last week Tudor Investment Corp told investors in its $10 billion BVI Global fund that they would not be able to exit in the next months as managers restructure the fund.

Many investors are hoping that these moves will reduce the wild swings in the market. But CNBC’s Melissa Lee isn't so sure. She says there are hundreds of billions of dollars yet to be redeemed in this market through the end of the year.

What does that mean for investors? Proceed cautiously. Through the end of the year the redemptions could still move markets violently. And not just stock markets but commodities as well.



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Trader disclosure: On Dec. 4th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (MSFT), (WMT), (UUP), (MCD); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (FCX); Najarian Owns (NUE) And Is Short (NUE) Calls; Najarian Owns (CIT) Calls; Najarian Owns (SBUX) Call; Seymour Owns (AAPL), (BAC), (BX), (F), (MER); Seygem Asset Management Owns (RIO)

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