Growing numbers of hedge-fund investors, desperate to redeem their money and avoid further losses, are turning to a secondary market in which to sell their stakes, according to the Wall Street Journal.

It can be difficult for investors to redeem stakes in hedge funds in a hurry, particularly if funds operate lock-in clauses or invoke the right to restrict exits in certain conditions, as at present. A flood of investor-redemption requests has triggered the activation of several hedge funds' automatic "gates," which limit the percentage of a fund's assets that can be redeemed in a given quarter, as reported recently by WealthBriefing.

Other funds have voluntarily suspended redemptions altogether, and many people fear that more gates and suspensions are coming.

That concern has forced investors to look for more creative and immediate ways to get out. Right now, buyers and sellers can find one another using their industry contacts, or through a service called Hedgebay Trading Corp, which operates the only secondary market that matches buyers and sellers of hedge-fund stakes. Discounts on such stakes have reached as high as 50 per cent in extreme cases.

When hedge funds were performing well, Hedgebay transactions would often see the buyer paying a premium for a stake in a well-performing fund. Now, however, nearly every stake that's being traded on Hedgebay is sold at a discount, Anastacia Brooks, a spokeswoman for Hedgebay, was quoted by the WSJ as saying.

Hedgebay, which began operations in 1999, says it has never been this busy. That's because the deadline for many investors to tell their hedge funds they want to withdraw money by the end of the year was 30 September, forcing them to go to the secondary market to sell their shares.

The average hedge fund is down more than 10 per cent this year, according to Hedge Fund Research. The Dow Jones Industrial Average is down more than 30 per cent this year, but many hedge fund investors aren't happy with just losing less than the market.