Posts filed under “Hedge Funds”

Moral Hazard and the LTCM Bailout

Today is an auspicious anniversary, though it’s one I suspect many people may not recall. On Sept. 23, 1998, former Federal Reserve Chairman Alan Greenspan and William McDonough, then president of the Federal Reserve Bank of New York, managed to orchestrate the rescue of the hedge fund Long Term Capital Management.

It was a strange exercise in both herding cats and moral hazard. It wasn’t a government bailout, since no taxpayer money was involved. More than a dozen Wall Street banks, many of which had exposure to LTCM, ponied up $3.65 billion to unwind the fund’s complex leveraged bets.

Still, the lesson learned was that in the event of troubles, the Fed could be counted on to lend a hand to a) avoid disruption; b) add liquidity and; c) protect the Street against catastrophic losses. In hindsight, it looks like the lessons learned were the wrong ones.

Recall the summer of 1998 when Russia — a hot investment for bond underwriters — defaulted on its ruble-denominated debt. This triggered a chain reaction of losses for anyone who either held Russian debt or had assets denominated in rubles.

The biggest of those suffering losses was the wildly overleveraged giant hedge fund. Continues here

 

Category: Credit, Hedge Funds, Really, really bad calls

Why Hedge?

The news last Monday was a shock — the Calpers California earthquake. For a variety of reasons, the California Public Employee’s Retirement System, the nation’s largest public-pension fund, said it was dropping hedge funds from its roster of investment allocations. This tremor will be felt far and wide. We are unlikely to know the full…Read More

Category: Asset Allocation, Hedge Funds, Investing

CalPERS to Hedge Funds: Buh-Bye

This was the big news yesterday out of California: The California Public Employees’ Retirement System (Calpers) today announced that it will eliminate its hedge fund program, known internally as the Absolute Return Strategies (ARS) program, as part of an ongoing effort to reduce complexity and costs in its investment program. The staff recommendation, supported by…Read More

Category: Hedge Funds, Investing, Really, really bad calls

Quantifying the impact of chasing fund performance

 

Category: Hedge Funds, Investing, Think Tank

MiB: Jim Chanos, Kynikos Associates

This week’s Masters in Business Radio show is on at 10:00 am and 6:00 pm on Bloomberg Radio 1130AM and Siriux XM 119. Our guest is famed short seller and hedge fund manager Jim Chanos. You can listen to live here. All of the past Podcasts are here and at Soundcloud and coming soon to…Read More

Category: Hedge Funds, Media, Philosophy, Podcast, Short Selling

Welcome to the Muppet Economy

Slipping back into my regular routine is sometimes a challenge after a few days of traveling. The first day back in the markets — especially following a week like we had to end July and begin August — can be a bit of an adjustment. A few days away allows the accumulation of jaded skepticism…Read More

Category: Hedge Funds, Investing, Really, really bad calls

Well Hedged Predictions

click for original cartoon Source: Medium:

Category: Hedge Funds, Humor, Really, really bad calls, UnGuru

Tales of the Death of Hedge Funds Have Been Greatly Exaggerated

During the past few months, we have posted a few words here on the quandary that is hedge funds. One such effort was titled “The Hedge-Fund Manager Dilemma,” and it explored the public’s fascination with the hedge-fund crowd. The next, “Why Investors Love Hedge Funds,” looked at why, despite stunning underperformance during the past decade,…Read More

Category: Hedge Funds, Investing, Psychology

The Transition From Alpha to Beta

click for larger chart Source: Pension Partners   Hedge-fund assets recently eclipsed $3 trillion. One of the more popular strategies for hedge funds has been the long/short equity fund. Charlie Bilello, director of research at Pension Partners and the source of our chart today, writes:  Continues here

Category: Hedge Funds, Investing

Underinvested in US Equities, Overinvested in Hedge Funds

Last summer in Boston, the Trustee Leadership Forum for Retirement Security held its annual meeting at Harvard’s Kennedy School. Trustees and representatives of various state pension funds listened to explanations about the challenges facing endowments and pension funds. The conference is an attempt to explain why so many state pensions are underfunded and underperforming. The…Read More

Category: Hedge Funds, Investing, Venture Capital