Random Roger's Big Picture: Hedge Fund Stuff
Random Roger's Big Picture: Hedge Fund Stuff: "Before I get into this, a quick public service announcement; I responded to a medical call tonight and let me just say if you do an activity that might need a helmet with a faceguard...wear a helmet with a faceguard.
With the Amaranth blowup there have been and will be articles questioning whether people need hedge funds or not, questioning the purpose, calling them out for the blight that they are, you know, that sort of thing.
First a word about Amaranth. As best as I can tell being wrong about the trade did not blow up the fund. It was the misuse of leverage. Too much leverage seems to be at the root of most of the problems that arise, here I am excluding fraud.
The fact is that hedge funds do provide liquidity to certain markets and when coordinated properly, here I am thinking Swensen at Yale or El-Erian at Harvard (or Jack Meyer before him), they do serve a purpose and are appropriate. Of course this probably is of little importance to your portfolio."
With the Amaranth blowup there have been and will be articles questioning whether people need hedge funds or not, questioning the purpose, calling them out for the blight that they are, you know, that sort of thing.
First a word about Amaranth. As best as I can tell being wrong about the trade did not blow up the fund. It was the misuse of leverage. Too much leverage seems to be at the root of most of the problems that arise, here I am excluding fraud.
The fact is that hedge funds do provide liquidity to certain markets and when coordinated properly, here I am thinking Swensen at Yale or El-Erian at Harvard (or Jack Meyer before him), they do serve a purpose and are appropriate. Of course this probably is of little importance to your portfolio."
posted by jm at 8:24 AM
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