Recent falls in the value of stock market-listed hedge funds and an increase in investors anxious to exit the sector in order to raise cash might present opportunists with a timely opportunity to reap rewards.

The Financial Times has described as 'panic selling' the cause of the fall in the share prices of listed hedge funds in recent weeks, although the net asset value of the vast majority of hedge fund and fund of funds vehicles listed in London has also fallen this year.

However, average discounts to NAV have now surged from 1 per cent in early September to 20 per cent, and according to Alan Brierley, director of investment companies at Collins Stewart, in some cases discounts to NAV have reached 30 per cent.

Perhaps not coincidentally, fund of hedge funds manager Permal Investment Management Services is seeking to buy shares in hedge funds at sizeable discounts to their market value as more investors become distressed sellers.

Permal, which has USD34bn in assets under management, is reported to be launching a fund of funds that aims to purchase investments in hedge funds from other managers forced to sell their holdings, for instance because of their own investors' redemption requests. Permal hopes to negotiate discounts of between 25 and 30 per cent of NAV.

As with other assets, hedge fund shareholdings are likely to go on the auction block as the deleveraging of asset managers and their investors continues. But one person's distress is another's golden opportunity.