I've read a lot of dramatic predictions in terms of hedge fund redemptions that will result from this scandal...
Had an interesting thought, though. A crapload of funds have had shitty performance ... Anyone who is unhappy and lacking trust and in those funds will likely have already bailed. If you see -40% on the year, you are at least likely to already trust the integrity of what you are being told. After all, why would -40-50%+ be a lie?
I am thinking perhaps funds with 'unusual' great performance and 'block box' character to match will get pressure on redemptions. Those funds are likely to have profited from recent trends, I imagine, and are not holding too much of what has been beat up lately. With that said, we may get unwinding of recent trend trades that have worked. (long treasuries, long dollar, short commodity, short stock, etc)
Counterintuitive, but I imagine the weak hands are already shaken out of the hedge fund clientel.. Any further shaking should be a nail in the coffin, but those redemptions won't necessarily result in what everyone expects (selling of long stock and bond portfolios).
Hell could you imagine what would happen if levered CDS protection buyers were forced to neutralize their positions? Bonds in all classes could skyrocket. I'm sure those funds betting on wide spreads have done well as of recent, and might be under scrutiny.
In the end, no one knows the results. How much long equity exposure exists in the hedge fund universe as a percentage of total assets is an unknown, so it is impossible to ascertain conclusions.
Also: if people take money into their own hands as result of this lack of trust, why are they not necessarily buying stock, ETF, and bonds themselves? That money doesn't stay in cash necessarily forever, and people who are invested hedge funds generally realize they were there because cash as an asset offers no protection in inflationary times. And despite one side of media, there's a large consensus of investor that still buys the inflation story as correlated to recent monetary supply changes from world central banks. That leaves the alternatives: assets, just not parked under a rip-off hedge fund billing structure.
Had an interesting thought, though. A crapload of funds have had shitty performance ... Anyone who is unhappy and lacking trust and in those funds will likely have already bailed. If you see -40% on the year, you are at least likely to already trust the integrity of what you are being told. After all, why would -40-50%+ be a lie?
I am thinking perhaps funds with 'unusual' great performance and 'block box' character to match will get pressure on redemptions. Those funds are likely to have profited from recent trends, I imagine, and are not holding too much of what has been beat up lately. With that said, we may get unwinding of recent trend trades that have worked. (long treasuries, long dollar, short commodity, short stock, etc)
Counterintuitive, but I imagine the weak hands are already shaken out of the hedge fund clientel.. Any further shaking should be a nail in the coffin, but those redemptions won't necessarily result in what everyone expects (selling of long stock and bond portfolios).
Hell could you imagine what would happen if levered CDS protection buyers were forced to neutralize their positions? Bonds in all classes could skyrocket. I'm sure those funds betting on wide spreads have done well as of recent, and might be under scrutiny.
In the end, no one knows the results. How much long equity exposure exists in the hedge fund universe as a percentage of total assets is an unknown, so it is impossible to ascertain conclusions.
Also: if people take money into their own hands as result of this lack of trust, why are they not necessarily buying stock, ETF, and bonds themselves? That money doesn't stay in cash necessarily forever, and people who are invested hedge funds generally realize they were there because cash as an asset offers no protection in inflationary times. And despite one side of media, there's a large consensus of investor that still buys the inflation story as correlated to recent monetary supply changes from world central banks. That leaves the alternatives: assets, just not parked under a rip-off hedge fund billing structure.
