http://www.opalesque.com/49253/Hedge_fund_world_much_closer_to_ethical.html Other Voices: Hedge fund world much closer to ethical normalcy than corporate and government worlds in general Wednesday, January 07, 2009 From Philippe Manet, Peak Partners Geneva (www.peakpartners.com). Whilst journalistic and political venom has been squirted at hedge funds, the evidence is that, as a whole, they have managed to contain losses better that traditional forms of investing in risk assets. Indeed, indices indicate that hedge fund losses have been around one half of losses in equity markets. While this performance is disappointing, it is worth noting that most hedge fund strategies have had to operate without most of their âtool-boxâ, due to restrictions on short-selling, declining liquidity, withdrawal of credit lines and a dwindling number of counterparties. Since many banks had chosen to become hedge funds with less transparency, questionable alignment of interest and doubtful skills, it is worth comparing the 18.2% decline in the HFRI fund weighted index with the 62% loss in the Amex Select Financial Sector Index. Several differences should be pointed out; first, financial companies have used every possible trick to avoid marking the entirety of their holdings to market, unlike hedge funds, and, second, the recovery potential for banks will be limited by their shrinking business mix, which will contribute to capping multiple expansion. Again, hedge funds draw criticism because it is felt that they operate in a parallel world where different rules apply. Quite to the contrary, the hedge fund world is much closer to ethical normalcy than what has happened in the corporate and government worlds. For hedge funds, success indeed means wealth and glory and failure translates into poverty and shame. Fraud committed by hedge fund managers leads to criminal prosecution and jail terms. Not so in the corporate world where golden parachutes reward the foolhardy while, in politics, there seem to be no penalty for the leveraged hypothecation of budgets; condemning citizens to a future of ever compounding financial slavery. Strategy outlook for Q1 2009 As suggested above, there are many opportunities for relative value strategies where returns can be generated without any recourse to leverage. In particular, once the forced selling of fixed income instruments abates, there will be substantial opportunities along the entire spectrum of corporate and structured credit. However, while we felt, not so long ago, that this forced selling would ebb into the end of Q4 â08, it now appears that the Madoff fraud has caused an indiscriminate distrust of hedge funds and created an additional wave of redemptions, leading to whole or parts of portfolios being a...................... To view our full article Click here
Finally, some truth emerges from the viterol spawned by the ignorant and fearful. happy new year! surf
Exactly right..... Hedge funds can fight with two hands while mutual funds fight with one. All securities go up and down, thus it would be more prudent actually, and safer for hedge funds to replace mutual funds.... The "suitability" rule allowed for "blue chip" stocks ....ie GM.... is actually "not suitable".... And by the way...."Suitability" is now a passing liticious fad ? ........................................................................................... There is room for improvement...... Hedge funds are just "management"..... A hedge fund should just be a "management series" that could be just another listed stock.... The share value would reflect the actuals that the hf is holding that also trade on the exchanges.... ....................................................................................... Actually firms like Vanguard exist because of those employing active management.....Otherwise, the result would just be a low yielding bond....The head of Vanguard is just a lucky guy that talks his book....and tries to denounce active management as his selling point....which would be the same as cutting his own throat... ....................................................................................... Actually hedge funds should just be another "manager option"....and could trade in 1x2x3x4x leverage shares at the choice of the customer.... Also the idea of "only accredited investors allowed" would be eliminated.....Just another listed fund..... ............................................................................................ The point being that all the recent quandry of regulation can be largely eliminated by requiring all instruments utilized to be traded on an exchange.....Management fees could be much like a "reverse dividend"....And thus the mangement unit would be seen in real time.....and the investor could liquidate or invest at anytime .... ......................................................................... It would be highly imprudent for retirement funds to be in "long only" strategies.....This is an ancient line of thinking.... All markets are really "trading markets".....and provide the illusion of an "investment market"....