Comments on: Hedge Funds Investors Withdraw Record $40 Billion in October

By: doc holiday

doc holiday — Fri, 21 Nov 2008 03:23:00 +0000

This redemption issue is what will be interesting, because those short term Treasuries yielding about zero will tie up money in bills that are burning cash, which will impact the hedges even more, and the other factor is that to buy into these non-yielding bills is costing more and more dough. In a nutshell, this interplay will bring about unique impacts during heavy redemption periods that stress the risk models and at some point, this stress will break the buck for various funds that are in weak situations.

Then again, I’m just making this up and live with several supermodels in the LHC.

By: Lune

Lune — Fri, 21 Nov 2008 02:27:00 +0000

Actually, the $1560bn is total assets. According the article, some funds have upto 50% in cash for redemptions.

Assuming generously that the industry as a whole is sitting on 1/3 cash, that would be ~$500bil, or about the amount of market cap the S&P lost today. At best, all that cash could save the markets from one bad day like today, not force a true bottom.

By: JB

JB — Fri, 21 Nov 2008 01:42:00 +0000

Thank you for the great cutting and pasting of these articles, Yves. Thanks to your site I don't even have to go to the Bloomberg and FT sites to get my info.

$1560bn---wow that's alot of money sitting on the sidelines. Maybe we are near the bottom.

What a terrible day in the markets! Nowhere to run and nowhere to hide. Interesting times, indeed.