Before Madoff hedge fund report
Do ya think it's gettin any better? Compare October to today. Yep new SEC, new media focus and heads will roll. Unregulated will become regulated. Will NIR survive? Maybe. They looked up a saw the vultures and went inta full fledged damage control. IQ checkin time is here. Not a bad thing. Who wants idiots playin games that effect millions?
October 9, 2008
Markets R.I.P: The Great Unwind
By Andrew Mickey
Chief Investment Strategist, Q1 Publishing
Pensions & Investments magazine warn, “Bloodbath Ahead.”
Reuters predicts, “D-Day for Hedge Funds as Redemptions Roll In.”
CNN cautions, “Hedge Fund Blues are Just Beginning.”
The markets sit perilously on the edge of disaster. A downward spiral is getting stronger and there’s not much that can be done about it. And one of the leading has been and will be hedge funds.
The redemptions are playing a big role in the current market selloff. And they could spark the next round of a disastrous spiral.
It goes like this. A few investors say they want their money back. A hedge fund has to sell what it can to pay them back regardless of how bad the timing may be. They are forced to dump shares onto a market with very few buyers. The market slides even more. That slide leads to more fear, more redemptions, more selling, and on and on.
Normally any single fund unwinding its positions can be absorbed by a healthy market. But the market isn’t healthy. And if just a small percentage of the 9,000 hedge funds with more than $1 trillion under their control (and a lot more borrowed money that needs to be unwound) push the sell button at the same time, the impact on the markets can be huge.
Over the past few weeks a lot of them are pushing the sell button.
Hedge fund performance is down…way down. Eurekahedge, which tracks hedge fund performance, says less than one in 10 funds of the 4,000 it tracks are in positive territory. Even Maverick Capital and Greenlight Capital, two former top tier hedge funds, lost an average of 16.1% according to Bloomberg.
Hedge funds are falling apart. And investors are demanding their money back in droves. It’s getting so bad a record number of hedge funds are closing up shop altogether.
There are some big funds that have to sell out completely. Sowood Capital Management recently closed its doors after dumping what was left of its $3 billion in assets. The $2.8 billion commodity trading fund Ospraie closed its doors after its value fell 40% in August. Two Bear Stearns multi-billion dollar hedge funds practically took down the entire firm.
And those are just a few of the big ones. Hundreds of smaller funds are going through equally tough times. CNN reports, “By the end of the year, it’s estimated 679 funds will be shut down.”
They shut down and liquidated.
The spiral continues…
