Wisely, most hedge funds moved away from Lehman Brothers in the past few months. But a few weren’t so lucky.
FT: About 100 hedge funds that used Lehman Brothers as their prime broker had positions held via the failed bank frozen on Monday as administrators took charge of the London business and the US holding company filed for bankruptcy.
Many hedge funds had already abandoned Lehman, shifting balances from the prime brokerage to rivals amid widespread worries about the bank and its plunging share price.
But those funds that remain with the bank face uncertainty and possible losses of assets, with several funds and a Lehman broker on Monday saying positions held in London had been frozen. Lehman did not return calls seeking comment.
The collapse – the biggest bankruptcy in history – prompted many funds to reassess the riskiness of their prime brokers, divisions of banks which provide leverage to hedge funds and help them sell stocks short.
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