Seeking safety with custodians

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In the low-risk, back-to-basics market environment ushered in by the financial crisis, custodian banks have emerged as a safe haven for hedge fund assets. The collapse of Lehman Brothers in September 2008 highlighted the risks hedge funds take on by keeping cash and long assets in a commingled prime brokerage account.

It could be years before hedge funds are able to recover the assets frozen by the administrator as part of the bankruptcy proceedings. Those that had their assets rehypothecated by

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