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GeneralDude
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When are we going to see hedge funds blow up?

September 18th, 2008, 4:15 pm

I figure the volatility in their returns are drastically higher than the big banks. At least some of them exposed to going bankrupt... no?
 
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daveangel
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When are we going to see hedge funds blow up?

September 18th, 2008, 5:40 pm

there has been a large number of funds in drawdowns and some have blownup. credit hedge funds have suffered - Peloton, Bear Stearns etc
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Collector
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When are we going to see hedge funds blow up?

September 18th, 2008, 5:41 pm

credit lines are drying up I am sure
 
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twofish
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When are we going to see hedge funds blow up?

September 18th, 2008, 7:47 pm

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.
 
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daveangel
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When are we going to see hedge funds blow up?

September 18th, 2008, 7:48 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
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TraderJoe
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When are we going to see hedge funds blow up?

September 18th, 2008, 7:51 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.Some have billions of AUM and are highly leverage. Recall LTCM - when genius failed.
 
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twofish
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When are we going to see hedge funds blow up?

September 18th, 2008, 8:20 pm

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.
 
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TraderJoe
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When are we going to see hedge funds blow up?

September 18th, 2008, 8:34 pm

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.
 
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jomni
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When are we going to see hedge funds blow up?

September 19th, 2008, 12:32 am

Maybe they won't reach the news as this is already expected and not sensational.
 
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daveangel
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When are we going to see hedge funds blow up?

September 19th, 2008, 4:35 am

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.
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amit7ul
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When are we going to see hedge funds blow up?

September 19th, 2008, 7:10 am

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
 
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daveangel
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When are we going to see hedge funds blow up?

September 19th, 2008, 7:12 am

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 ?
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Martinghoul
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When are we going to see hedge funds blow up?

September 19th, 2008, 9:09 am

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.
 
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greghm
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When are we going to see hedge funds blow up?

September 19th, 2008, 11:32 am

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.Well they obviously trade against counterparties so that is an issue. Sometimes the counterparty is the one which his provoking the blow up. Peloton is a perfect example.Also investors loose money and sometimes that is made public. And the general figure for the size of the industry in terms of AuM (and I am talking about single HFs) is between 2 and 3. $ 2.6 is the figure I would take. Some studies think that the average leverage of for the industry is 3 which is relevant because it is (was) that figure for the Equity Long/Short. Fixed Income can be around 20 and some other strategies are not leveraged at all.
Last edited by greghm on September 18th, 2008, 10:00 pm, edited 1 time in total.
 
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trackstar
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When are we going to see hedge funds blow up?

September 19th, 2008, 12:24 pm

Re: LTCM 1998Although LTCM’s leverage ratio eventually reached 100:1, its leverage before the crisis was about 25:1, with about $4.7 billion in capital and $125 billion in debt. In their post-bailout presentations, LTCM partners compared the firm’s targeted 25:1 leverage during that period to the 34:1 leverage common at securities firms and the 24:1 leverage common at money-center banks. According to another LTCM explanation, the firm was trying to earn 1 percent on assets, leveraged 25 times, which would result in a 25 percent return.…As one source put it: "LTCM became the victim of a classic squeeze, as many Wall Street firms got out in front of LTCM’s positions...including A.I.G., which was trying to weaken LTCM’s positions so it could buy its portfolio on the cheap."Financial journalists are out straight these days, so hedge funds news in the mainstream media may come later, if at all.But you could have a look here:HedgeFund.net
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