We wrote earlier that the hedge fund industry was facing significant redemptions due to lousy performance and the desire of many investors to reduce their risk exposures. The Lehman bankruptcy, the biggest to date, is pouring gas on that fire. Hedge funds in the US report their net asset values monthly (evidently the convention in […]
Read more...Nouriel Roubini predicted that hedge funds closures would be the next leg of the financial crisis. Large scale redemptions force hedge funds to sell assets at a time not of their choosing. More assets being dumped at a time of risk aversion is likely to lead to distressed prices, putting pressure on other players, since […]
Read more...One sign that the credit crisis is accelerating: Nouriel Roubini’s forecasts are coming to fruition faster. In the past, Roubini has too often played the role of seemingly mad prophet in the wilderness until he is proven correct. His calls that the housing bubble would collapse in a nasty way, that subprime was most certainly […]
Read more...One of the reasons that Bear Stearns unraveled so quickly was that hedge fund customers and trading counterparties started reducing their exposures out of fear that their funds would become subject to a bankruptcy proceeding, leaving them unable to trade them. Worse, as some hedge funds are learning, customer agreements permitted Lehman (as most other […]
Read more...As we noted in a post yesterday, the assault on the evil shorts may wind up being a case of unintended consequences, since the investors targeted, mainly hedge funds, often use leverage supplied by their friendly prime broker (Goldman and Morgan Stanley are far and away the biggest in that business). If funds take big […]
Read more...The Wall Street Journal tells us that some less-than-nimble-footed hedge funds wound up not moving their prime brokerage accounts quickly enough out of Lehman to avoid having those assets frozen in the bankruptcy. Most readers will probably find it hard to work up much sympathy for these Masters of the Universe. Despite the name “prime […]
Read more...We’ve remarked from time to time this year that a lot of hedge funds aren’t having a particularly good time these days. The volatility that has punished mere mortals has also taken a toll on many Masters of the Universe. The Wall Street gives an update, showing that even some of the biggest names have […]
Read more...While there are no doubt some hedge funds that have managed to navigate the minefield of turbulent markets successfully, the sudden, sometimes violent reversal of trends and breakdown of correlations had made the hedge fund operator’s life particularly difficult. The UK’s Times (and remember London is an even bigger hedge fund center than the New […]
Read more...Full disclosure: I have a great deal of respect for both Tim Duy and the hedge fund manager Scott who is also quoted in this post. As you will see, Duy wrote an interesting post addressing a question posed by Brad DeLong, in essence “Since we are in the midst of the worst financial crisis […]
Read more...When I read this Bloomberg story, “Blackstone Risks Hedge Funds’ Return as LBO Lending Evaporates,” my first reaction was “conflict of interest”. My second was “lawsuit”. Everyone casts a blind eye at arrangements like this until the returns falter. My third was that everyone interview seemed extremely reluctant to say anything critical of Blackstone. That […]
Read more...The New York Times has a peculiar story on hedge fund manager John Devaney who managed to lose all his investors’ money. Not 80% or 90%. All. And it wasn’t as if the fund somehow blew up spectacularly over a short period. Devaney froze redemptions a year ago. That begs the question: had he started […]
Read more...The media enjoys stories of bad times in hedge fund land. It probably makes up for having to write about their managers’ over-the-top lifestyles. What is a little different about today’s hedge fund sighting from Bloomberg isn’t that certain funds or certain styles are faring poorly (remember the quant disasters of last August?) but hedge […]
Read more...Paul Kedrosky posted on a report published in a Swiss paper (he courteously provided the English translation) of the results of a study prepared for hedge fund Bridgewater Associates that projects that total losses to the financial system from the credit crisis will reach $1.6 trillion. Note that losses taken to date are only $400 […]
Read more...My favorite section of the indictment against Ralph Cioffi and Miatthew Tannin (which is good reading): As described to investors by the defendants and others, the High Grade Fund’s objective was to provide a modest, safe and steady source of returns to its investors. CIOFFI, TANNIN and others told investors that they could expect annual […]
Read more...John Paulson, of the eponymous hedge fund Paulson & Co., contends that the credit contraction has run only about 1/3 of its course as far as writedowns are concerned. He anticipates that the total credit losses will reach $1.3 trillion, which exceeds the IMF’s forecast of $845 billion. Paulson, who made a spectacularly successful bet […]
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