As hedge funds emerged from their second-worst month in the past 10 years, investors have started selling their stakes at a discount. "I expect quantitative and credit hedge funds to see net outflows and the industry may face redemptions towards the end of the year," said Laurent Chevallier, head of hedge fund investments at Unigestion. "The instability in hedge funds' asset base means that at worst, they may be the catalyst for an unwinding of the credit market. We have therefore been checking the cash management and counterparty risk at every hedge fund where we have an investment."

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