SERVING THE QUANTITATIVE FINANCE COMMUNITY

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GeneralDude
Topic Author
Posts: 86
Joined: August 26th, 2006, 11:44 pm

When are we going to see hedge funds blow up?

I figure the volatility in their returns are drastically higher than the big banks. At least some of them exposed to going bankrupt... no?

daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

When are we going to see hedge funds blow up?

there has been a large number of funds in drawdowns and some have blownup. credit hedge funds have suffered - Peloton, Bear Stearns etc
knowledge comes, wisdom lingers

Collector
Posts: 4607
Joined: August 21st, 2001, 12:37 pm

When are we going to see hedge funds blow up?

credit lines are drying up I am sure

twofish
Posts: 4944
Joined: February 18th, 2005, 6:51 pm

When are we going to see hedge funds blow up?

When hedge funds die, they crawl into some corner and quietly go **poof**. At this point they are much too small to bring down the world financial system.

daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

QuoteOriginally posted by: twofishWhen hedge funds die, they crawl into some corner and quietly go **poof**. At this point they are much too small to bring down the world financial system.not true ... hedge fund assets are around $1trn which is not insignificant knowledge comes, wisdom lingers TraderJoe Posts: 11048 Joined: February 1st, 2005, 11:21 pm When are we going to see hedge funds blow up? QuoteOriginally posted by: twofishWhen hedge funds die, they crawl into some corner and quietly go **poof**. At this point they are much too small to bring down the world financial system.Some have billions of AUM and are highly leverage. Recall LTCM - when genius failed. twofish Posts: 4944 Joined: February 18th, 2005, 6:51 pm When are we going to see hedge funds blow up? QuoteOriginally posted by: TraderJoeSome have billions of AUM and are highly leverage. Recall LTCM - when genius failed.A billion is not what it used to be. Lehman had$600 billion AUM. AIG has $1 trillion. Fannie and Freddie have securitized about$5 trillion. There is $62 trillion notation in credit default swaps out there, and no one has any clue what the real value at risk is.If a hedge fund went belly up like LTCM did, people would hardly notice now. TraderJoe Posts: 11048 Joined: February 1st, 2005, 11:21 pm When are we going to see hedge funds blow up? QuoteOriginally posted by: twofishQuoteOriginally posted by: TraderJoeSome have billions of AUM and are highly leverage. Recall LTCM - when genius failed.A billion is not what it used to be. Lehman had$600 billion AUM. AIG has $1 trillion. Fannie and Freddie have securitized about$5 trillion. There is $62 trillion notation in credit default swaps out there, and no one has any clue what the real value at risk is.If a hedge fund went belly up like LTCM did, people would hardly notice now.What about hedge funds (plural)? According to this article, hedge funds have around$3 trillion AUM as of 2008, and what about leverage? And how many of those CDS's and level 3 toxic waste do HF's have on their books? My understanding is that HF's are more highly leveraged than govt enterprises, insurers, and banks and take alot more risk. Watch over the coming weeks...
Last edited by TraderJoe on September 17th, 2008, 10:00 pm, edited 1 time in total.

jomni
Posts: 999
Joined: January 26th, 2005, 11:36 pm

When are we going to see hedge funds blow up?

Maybe they won't reach the news as this is already expected and not sensational.

daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

QuoteA billion is not what it used to be. Lehman had $600 billion AUM. AIG has$1 trillion. Fannie and Freddie have securitized about $5 trillion.these numbers are assets on the balance sheet not assets under management (AUM) which is what a hedge fund would have. AUM in hedge funds is investor equity. The thing with Leh, AIG, FNM and FRE is their AUM (or equity) was zero hence the wipeout. knowledge comes, wisdom lingers amit7ul Posts: 571 Joined: December 7th, 2004, 8:36 am When are we going to see hedge funds blow up? as far as i remember LTCM was capitalized to 3-5 billion and had AUMs with capital leveraged to 30s..so definetly not more than 150-160 billion.. compare that with LEH.. LTCM looks like a child daveangel Posts: 17031 Joined: October 20th, 2003, 4:05 pm When are we going to see hedge funds blow up? QuoteOriginally posted by: amit7ulas far as i remember LTCM was capitalized to 3-5 billion and had AUMs with capital leveraged to 30s..so definetly not more than 150-160 billion.. compare that with LEH.. LTCM looks like a childfirst of nobody actually knows how much levergae they had - 30 seems be the low end. second, the market is much, much bigger now. How many hedge funds were around in 1998 ? knowledge comes, wisdom lingers Martinghoul Posts: 3255 Joined: July 18th, 2006, 5:49 am When are we going to see hedge funds blow up? Money mkt funds are a) bigger$(3.3trn in assets); b) figure with a lot more significance in the funding mkt, so I would be looking at those instead, if I were you. There have been some developments in that space. And, lo and behold, the US Trsy to the rescue of the money mkt fund!!!!!!
Last edited by Martinghoul on September 18th, 2008, 10:00 pm, edited 1 time in total.

greghm
Posts: 1094
Joined: July 14th, 2002, 3:00 am