Hedge funds incorporated in Bermuda, the Cayman Islands, and the British Virgin Islands face substantial legal challenges in 2009, especially in meeting liquidity needs for redeeming investors.  Many hedge fund assets and investments have declined both in value and in liquidity.  Some assets are hard to value.  Other investments are illiquid.  Many investors have been seeking to withdraw their investments in hedge funds and to have their shares redeemed for value.  There is unlikely, however, to be enough cash or liquid assets available to pay all of them, at the same time.  There are a variety of defensive strategies potentially available to hedge funds holding illiquid assets when faced with a rush of redemption requests and requests for payment.  In a guest article, Alex Potts of Conyers Dill & Pearman details various of those strategies, and offer a comprehensive discussion of the evolving caselaw regarding redemptions from hedge funds organized in the British Virgin Islands and the Cayman Islands.