Category Archives: Hedge funds

Fed Worried About 1998 Rerun

Michael Panzner pointed us to a Bloomberg column by John Berry, “Fed Officials Fret Another `Russia’ May Occur.” Frankly, we are delighted to read this. It is high time the Fed woke up and took stock of the excesses taking place in virtually every asset class. Not only do we have very high liquidity, asset […]

OTC Derivative Risk to the Dealer Community

A very good post by Roger Ehrenberg at Seeking Alpha, “OTC Derivatives: Risks and Rewards,” which explains that the over the counter derivatives business poses a risk, perhaps a significant risk, to the Wall Street community. For the benefit of readers, over the counter derivatives are those that are not traded on an exchange. Recognize […]

Dubious Lists

Today I read the hot-off-the-presses Alpha Magazine ranking of the 100 largest hedge funds. Since hedge funds are a secretive lot, it’s admittedly difficult to come up with good information on them. However, I am hardly a hedge fund industry expert, yet I know of two hedge funds that are well above the size of […]

"Snapping Point?"

As I have mentioned before, this blog relies a bit more than I’d like on the Financial Times because its writers have a greater understanding of the inner workings of the financial markets and take a jaundiced view of recent developments. One has to wonder if the two traits are linked: if you have a […]

FT Warns of Profligate Lending and Deteriorating Standards

Unlike its US counterparts, the Financial Times has consistently been on top of the various unsavory elements of the credit market bubble: the near disappearance of risk premia, the growth of leverage on leverage, the lack of investor sophistication. A piece by John Plender does a very good job of connecting some of the dots […]

More Signs of Frothiness in the Debt Markets

Although it’s the Dow’s new highs that get the headlines, the really speculative action is taking place in the debt markets. As we have discussed in past posts, lenders and bondholders have abandoned their customary caution and are accepting yields that many feel are inadequate for the risks involved, and are also waiving customary covenants, […]

BIS Warning on Hedge Fund-Investment Bank Relationship

The Financial Times appears to have scooped the Wall Street Journal, Bloomberg, and the New York Times on a Bank of International Settlements report due out today, which says that investment banks are too cozy with hedge funds and that isn’t very good for the financial system. The BIS report calls for greater disclosure of […]

Is Systemic Risk Underestimated?

The question of systemic risk, that is, the possibility of a generalized failure of the financial system, such as a stock market crash, is something that regulators think about a great deal and quite deliberately discuss a good bit less, since fear becomes a driving element in any market panic. The reason for the heightened […]

"NY Fed warns on hedge fund risk"

Oddly, this story, which runs in today’s Financial Times, does not seem to have been reported in the Wall Street Journal or the New York Times (and perhaps not on Bloomberg either, but I am less certain since its search tools for the great unwashed aren’t foolproof). The findings, at least for the Fed, are […]

Now It’s Official: Hedge Funds Deliver No Alpha

Ha. We were suspicious in back in 2005 when Edhec-Risk, an asset management research company, issued a report, “Hedge fund industry: is there a capacity effect?” which examined whether various hedge fund strategies were becoming too crowded for the managers for the managers to earn excess returns. And excess return (meaning earning more than the […]

Valuations: Another Reason to Worry About Hedge Funds

As we’ve pointed out, if one is the worrying sort, hedge funds give plenty of reason to concentrate the mind. It’s not just that they are highly leveraged, unregulated, big, and getting bigger. The Fed has also admitted it doesn’t know what they are up to, which means their reassurances aren’t fact based (how can […]