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Fund providers like IndexIQ aim to mimic hedge funds' exposure to different sectors by using exchange-traded funds.
But as the markets got worse, Mr. Tannin became increasingly worried about the funds' exposure to securities backed by subprime mortgages.
The new law eliminates that limit, substituting a provision that the funds' exposure to currency fluctuations may not exceed 30percentt.
She said QIC's typical funds exposure to coal, oil and gas companies was 10%, which, if extended to QUT's investments, would amount to $30m.
According to a Fitch Ratings survey of the 10 largest money market funds, exposure to Europe fell by 27 percent on a dollar basis from May through August.
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A new investment approach will reduce funds' exposures to any single investment, after 30% of Terra Firma's TFCP II and TFCP III funds were put into EMI.
"It's working smartly behind the scenes to give a hedge fund exposure in the marketplace".
The company has an additional $400 million in hedge fund exposure, which is substantially collateralized, it said.
Hedge fund exposure to Lehman came in many forms and was not limited to its prime broker unit.
A spokeswoman, Kristin Lemkau, said the bank withdrew from the Madoff-linked funds last fall after "a wide-ranging review of our hedge fund exposure".
"We have plenty of buffers of liquidity and we are adjusting to the reduction in the money market fund exposure".
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