Globally, total capital invested in hedge funds ran to some EUR 1,000 billion at end-2008, according to research bureau Hedge Fund Research. Last year, negative returns on investments, investor withdrawals and banks’ tightened financing conditions caused liquidity problems for a number of hedge funds. Many hedge funds rely heavily on leverage.
Several Dutch hedge funds also faced difficulties. Still, the Dutch sector is characterised by relatively low reliance on leverage. This is partly because a considerable portion of Dutch hedge funds are 'funds of hedge funds', which do not make straight investments but rather participate in other (foreign) hedge funds.