Many commentators on the bailout of E*Trade by hedge fund Citadel focused on either the terms of the deal (costly to E*Trade) or the fact that Citadel, like some other risk-minded investors, are starting to pick and choose among distressed mortgage assets, a sign they believe that the bottom is nigh. But a Reuters story, […]
Read more...The most successful fund in the “bet against subprime” game is Lahde Capital, established last year by Andrew Lahde, is up 100% after fees. However, the fund is so small that the article in the Financial Time on its results didn’t say how much has under management. Firms that produce such dazzling returns can turn […]
Read more...Quants take it on the chin again. This time, the miscue was a wrong-footed bet on stock price appreciation. From Bloomberg: Some European quantitative funds that bet on rising stock prices may have lost 15 percent this month as equity markets declined, according to strategists at JPMorgan Chase & Co. Fund managers using mathematical formulas […]
Read more...Goldman’s high profile and formerly highly successful quantitative hedge fund, Global Alpha, was one of the biggest casualties of turbulent markets in August, shedding 22.5% of its value. The firm orchestrated a shorting up of another one of its quant hedge funds (Global Equity Opportunities), putting in $2 billion of new Goldman money and raising […]
Read more...Did you think the Bear Stearns hedge fund drama of the summer was over? We may see a low-budget sequel. The Financial Times reports that aggrieved shareholders of one of the failed Bear funds, High-Grade Structured Credit Strategies Enhanced Leverage (Overseas), have assumed control. US based investors get to vote on Friday (no guess as […]
Read more...According to the New York Post, not only has famed hedge fund AQR, operated by former Goldman trader Cliff Asness, shown a 6% fall in value, but some investors are seeking to redeem funds, which says they have lost faith in the manager’s strategy. As a result, the fund has scuttled its plans for an […]
Read more...The IRS is turning up the spotlight on hedge funds and private equity firms. It appears that some may have been taken what might politely be called overly aggressive tax positions. It’s going to be pretty hard for these captains of capitalism to convince the public that they need to keep their favorable tax treatment […]
Read more...Hedge funds charge vastly higher fees than other money managers because they allegedly deliver better investment returns. Yet when you look at most hedge fund indices, they don’t look much better, and are sometimes worse than simple long-only strategies. And remember these indices almost certainly overstate performance, since they exhibit what is called “survivorship bias.” […]
Read more...Before we get to the fun stuff, in which I foam at the mouth, let me stress one thing: I am not opposed to hedge funds. I have both friends and clients who run hedge funds. And philosophically, a certain amount of speculative capital helps the economy run more smoothly. What I am opposed to […]
Read more...The Journal is breathtaking in its propensity to sell stories past their sell-by date as news. The latest example is an article, “Pricing Tactics of Hedge Funds Under Spotlight,” that will appear in the Tuesday “Heard on the Street.” Here’s the opening paragraph: New academic research suggests that some hedge-fund managers may cherry-pick flattering prices […]
Read more...It’s revealing that Robert Kuttner’s hard hitting, cogent testimony before the House Committee on Financial Services (hat tip Culture of Life News) has gotten very little attention in the media and the blogsphere. Perhaps it’s because Kuttner, an economist and former investigator for the Senate Banking Committee, argues persuasively that the strong ideological bias against […]
Read more...Paul Kedrosky (of Infectious Greed fame) points to a a terrific paper by Amir E. Khandaniy and Andrew W. Lo of MIT, “What Happened to the Quants in August 2007?”. I’ll confess that I have only skimmed it, but it looks thoughtful, has all the right caveats (the researchers admit they may not have and […]
Read more...A few days ago, we said we were willing to eat a bit of crow. Even though we had acknowledged some time ago that Bear might not survive the subprime mess as an independent firm, we also thought that no one with any sense would take a strategic position (taking a speculative bet is an […]
Read more...Investment banks are learning about reputation risk the hard way. First we had Bear Stearns winding down two troubled hedge funds it would have rather cut loose and let sink on their own. Then Lehman was pilloried in the Wall Street Journal, in “How Wall Street Stoked the Mortgage Meltdown, for its particularly close relationship […]
Read more...Goldman, on the back foot about the truly abysmal performance of its Global Alpha fund, is trying to shore up investor confidence, or more accurately, forestall a revolt. However, a Wall Street Journal article reports that they aren’t taking the sort of measures they did in August with the troubled Global Equity Opportunities Fund, when […]
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