The Hedge Funds are Selling, the Hedge Funds are Selling

Hedge Fund Selling Puts New Stress on Market, Jenny Strasburg and Gregory Zuckerman report:

Hedge funds have emerged as the latest serious problem in the global financial system. As their losses mount, they're selling off securities to meet demands for cash from lenders and investors. Compounding the problem is a surge in notices from investors indicating they want out.

What I hear: volatility is an euphemism.

It's tempting to write off recent declines as a fluke of short-term (and short-sighted) hedge fund speculation. If it's volatility, the market will turn around and swing back up, right? The shorts will have to cover, right? Wrong. These don't look like shorts going short. These look like longs going flat. The funds are selling because their customers tell them they want out of the funds, that is, out of the market. Many of these customers are long-term investors. Many of these "hedge funds" are net-long funds in all but name.

So: long-term, net-long investments are being liquidated. Blame the hedge funds if you prefer. When will the selloff end?

The University of Virginia, with an endowment of $4 billion in mid-October, recently said it plans to sell $400 million of its $1.8 billion in hedge funds in the next couple of years to fulfill commitments to other investments. (ibid, emphasis mine)