"These investments are the hedge fund equivalent of mortgage-backed securities: securities backed by hedge funds"
"In hedge funds, fears of an investor backlash" by Louise Story, New York Times News Service | September 29, 2008
First, the money rushed into hedge funds. Now, some fear, it could rush out.
Even as Washington reached a tentative agreement yesterday over what may become the largest financial bailout in American history, new worries were building inside the nearly $2 trillion world of hedge funds. After years of explosive growth, losses are mounting - and so are concerns that some investors will head for the exits.
No one expects a wholesale flight from hedge funds.
They NEVER DO!!
But even a modest outflow could reverberate through the financial markets. To pay back investors, some funds may be forced to dump investments at a time when the markets are already shaky. The big worry is that a spate of hurried sales could unleash a vicious circle within the hedge fund industry, with the sales leading to more losses, and those losses leading to more withdrawals, and so on.
What happens at hedge funds, those loosely regulated private investment vehicles, matters to just about every investor in America. Hedge funds are not just for the rich anymore.
Don't INVEST ME in your SHIT SICK SYSTEM!!
This is how PROPAGANDA WORKS!!!!
Since 2002, the industry has roughly tripled in size, as pension funds, endowments and foundations piled in, hoping for market-beating returns.
Well, some doing better than others.
Please see: Harvard's Big Dick
Now, the heady returns of the industry's glory days are over, at least for now. This is shaping up to be the industry's worst year on record, with the average fund down nearly 10 percent so far, according to Hedge Fund Research. Famous traders like Steven A. Cohen, who runs SAC Capital Advisors, are losing money, and even Kenneth C. Griffin, the head of Citadel Investment Group, is down in one of his funds.
And they are the lucky ones. A growing number of hedge funds are closing down. About 350 were liquidated in the first half of the year. Many funds are bracing for trouble. The industry has set aside $600 billion in cash, according to Citigroup analysts, partly because of the uncertainty hanging over the markets but also because of possible redemptions.
How come everyone has cash on hand except for the American people?
"Private equity firms are flush with cash... the firm has "money on the sidelines" that it's prepared to invest in the right opportunities."
If redemptions do pour in, hedge funds can freeze the process by not paying investors for a certain period of time, slowing the pace of withdrawals.
But it is MY MONEY and I WANT IT NOW!!!!!
One little-known hedge fund barometer is pointing to trouble, however. The alphabet soup of complex investments that Wall Street created in recent years - RMBS's, CDOs and the like - includes CFOs, short for collateralized fund obligations. Virtually unknown outside the industry, these investments are the hedge fund equivalent of mortgage-backed securities: securities backed by hedge funds. --more--"
Uh-oh!!!
