Liquidity issues challenge hedge funds as market turmoil persists

The first is funding liquidity risk. This is the ability to complete all of a fund's current or future cash obligations. Some funds bought long-term investments yielding higher rates using short-term capital to fund the purchase explains Campbell. As the market changed and as credit risk premiums increased with rising demand for collateral, funds were unable to borrow at the same rate they had first calculated. So the cost of short-term funding rose.

"There are also some institutions that had ag

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