Hedge funds ready to blow as positions liquidated | The Australian
I'm just looking into the hedge funds issue. The situation seems as if the hedge funds in Australia are literally starving.
Short selling ban has been extended in Australia. Hedge funds do both long and short positions so this means they lost half of their ability to earn. Especially since very few markets are going up nowadays - effectively disabling hedge funds to make any earning.
So, individual investors are pulling their money out of funds. Hedge funds are highly leveraged, having borrowed much more money on their customers' deposits.
The share market prices dropped, effectively driving down the value of the hedge fund's portfolio. Now, the problem is that when investors pull their money out of the fund, the fund has to either find other investors (let's forget about this option at this time) or pay back the loan used to buy shares. With highly reduced value of their portfolios, they are selling majority of their holdings just to survive. This, in effect, is driving market prices down further. So, another death spiral on the go.
Since the trouble headlines started in September, or earlier, it is a matter of time where many of them should simply fall down and disappear.
According to The Alternative Investment Management Association, the top 10 hedge fund managers in Australia in 2006 were:
I'm just looking into the hedge funds issue. The situation seems as if the hedge funds in Australia are literally starving.
Short selling ban has been extended in Australia. Hedge funds do both long and short positions so this means they lost half of their ability to earn. Especially since very few markets are going up nowadays - effectively disabling hedge funds to make any earning.
So, individual investors are pulling their money out of funds. Hedge funds are highly leveraged, having borrowed much more money on their customers' deposits.
The share market prices dropped, effectively driving down the value of the hedge fund's portfolio. Now, the problem is that when investors pull their money out of the fund, the fund has to either find other investors (let's forget about this option at this time) or pay back the loan used to buy shares. With highly reduced value of their portfolios, they are selling majority of their holdings just to survive. This, in effect, is driving market prices down further. So, another death spiral on the go.
Since the trouble headlines started in September, or earlier, it is a matter of time where many of them should simply fall down and disappear.
According to The Alternative Investment Management Association, the top 10 hedge fund managers in Australia in 2006 were:
- Platinum Asset Management
- PM Capital
- Barclays Global (Australia)
- Grinham Managed Funds
- AMP Capital Investors
- Optimal Fund Management
- Basis Capital Funds Management
- WestLB Asset Management (Australia)
- Kaiser Trading
- Portfolio Partners
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