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Tudor hedge fund loses 9% in a month

William Hutchings

02 Aug 2007
A $9bn (€7bn) hedge fund run by US firm Tudor Investment Corporation recorded a loss of 9.02% in July as many hedge funds failed to protect investors from falls in the equity market.

The loss by Raptor Global, a long/short equity fund, is one of the worst in its history, according to a hedge fund manager trading in the same market. The portfolio was hurt by falls in the equity markets last week.

A spokesman for Tudor declined to comment
 
German Government to step in to save hedge fund.

http://www.msnbc.msn.com/id/20079844/

Germany rescues subprime lender
Financial Times

Updated: 19 minutes ago
US mortgage turmoil hit investor confidence on the other side of the Atlantic on Wednesday as details emerged of a German government rescue of a domestic lender that suffered heavy losses on subprime investments.

The rescue of IKB, a specialist lender based in Düsseldorf, began on Sunday when Peer Steinbrück, German finance minister, called top banking executives to discuss a bail-out. According to people who took part in the conference call, Jochen Sanio, head of Germany's financial regulator, is said to have warned of the worst banking crisis since 1931.

IKB surprised investors this week with a profits warning after a multi-billion euro fund it managed was hit by problems stemming from its US subprime exposure. The news sent its shares plunging and prompted KfW, the state-owned development bank, to step in with a pledge to guarantee obligations of more than €8bn ($10.9bn) – more than five times IKB's stock-market value.
 
Hedge funds managers seen behind recent bout of late-day stock moves

The Associated PressPublished: August 3, 2007

NEW YORK: If you're baffled by Wall Street's performance this past week, consider the increasing influence hedge funds have in manipulating the market.

Investors spent another anxiety-ridden week watching last-minute triple-digit swings in the Dow Jones industrials, driven in part by worries about credit drying up and further subprime mortgage losses. But, while it looks like the market gyrates solely on fears about credit issues, market watchers say it is more complicated than that.

The Dow's 104-point drop in the final 15 minutes of Friday's session clearly had its roots in fundamental issues — comments from Bear Stearns Cos. executives that reignited fears of a widening credit crunch. But that drop, the 150 point sprint higher in the last 20 minutes of trading on Wednesday and a similar 100-point advance on Tuesday, might also have technical reasons behind them.

Hedge fund managers have been making bets on how far down or up the market will move in a given day by making sophisticated "short" and "call" investments. But the market hasn't always cooperated — going in the opposite direction from what hedge funds have expected and leaving them to scramble at the day's end to cover positions by buying or selling stocks.

"This is how hedge funds and the big proprietary trading desks on Wall Street make their money," said Peter Cohen, president of Massachusetts-based consulting and venture capital firm Peter S. Cohen & Associates. "For the individual investors, they are completely out of the loop and along for the ride."

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This catalyst for this new breed of volatility has been the market's increasing anxiety amid a continuum of dour headlines about faltering subprime debt and the erosion of leveraged buyouts. But it makes for an almost perfect trading environment for hedge fund managers who thrive on volatility.

Most of the activity can be seen in exchange-traded funds, especially those that track the Standard & Poor's 500 index. Hedge funds and mutual funds also rely on electronic trading systems that automatically execute trades based on algorithms, and that was also seen as a reason for the late-day surges.

Analysts believe this kind of a pattern is bad for the market — and should be discounted. Hedge funds now account for half the daily volume on the New York Stock Exchange, with average volume this week running about 2 billion shares.

"This is all noise, you have a bunch of lemmings that run left and right and up and down," said Roland Manarin, a portfolio manager who runs Manarin Investment Counsel. "It is when an absolute panic is going on that investors should get a second mortgage and diversify among stock investments. You just can't follow along with everyone else."

There was plenty of news to rattle hedge funds this past week. On Wednesday, American Home Mortgage Investment Corp. collapsed from exposure to loans made to investors with shaky credit; and mortgage insurers Radiant Group Inc. and MGIC Investment plunged because of wrong-way bets on securities tied to subprime loans.

With the collapse of two hedge funds managed by Bear Stearns still fresh, the market was also unnerved by rumors that hedge fund Caxton Associates LLC, a $12.5 billion (€9.13 billion) fund run by Bruce Kovern, was said to be facing margin calls from a number of brokerages because of steep losses.

"These kinds of things create an environment for people to generate profits on a short-term basis, working off of fear and greed," said David Grenier, president of Cutler Capital Management, which operates three hedge funds that focus more on a buy-and-hold strategy than on trading short term. "This kind of market allows some hedge funds to test their strategies with index funds, and the guys sitting with exotic strategies are more willing to wheel and deal in this kind of volatility."

Economists have predicted that the implosion of a few more hedge funds could create a panic on Wall Street, similar to Long-Term Capital Management's failure in 1998. For those trying to make money in the current market, shorting stocks ahead of such a shock could unlock millions of dollars in profits

It might be one of the reasons that Caxton acted quickly to offset what it called unfounded rumors in a letter to investors. The hedge fund said it has posted losses of about 3 percent in its flagship Caxton Global Investments fund last month, but is still up for the year.

But, in the meantime, the market rumors and unpredictable swings are causing some fatigue for portfolio managers and floor traders. "I don't know how long this can go on before some of these traders hit the breaking point," said Peter Dunay, an investment strategist with New York-based Leeb Capital Management.
 
Meh. A couple of up days and all this will be last year's news. The only thing to notice is the hysteria that the mass media is pumping.

opm8
 
Opps looks like GS hedge fund was unhedged! Expect more hedge fund meltdowns this week.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ak5AyYBt_meA&refer=home

Goldman's Global Alpha Fund Fell 12% in Two Weeks, 16% in '07

By Jenny Strasburg and Katherine Burton

Aug. 6 (Bloomberg) -- Goldman Sachs Group Inc.'s Global Alpha hedge fund fell almost 12 percent in the two weeks ended Aug. 3, bringing this year's decline to 16 percent after losses in stocks and bonds.

This year's drop in the $9 billion fund, managed by Mark Carhart and Raymond Iwanowski, follows the loss of about 9 percent in 2006, said two investors in the fund. Global Alpha's performance has reduced the fees paid to New York-based Goldman. The biggest U.S. securities firm booked $700 million from the fund in 2006.

The $1.7 trillion hedge-fund industry was roiled by losses in the credit and equities markets during the past two months. Two hedge funds managed by Bear Stearns Cos. collapsed and Sowood Capital Management LP, run by a former manager of Harvard University's endowment, is shutting down after a 60 percent loss.

``The fallout from June and July's credit rout is clearly resulting in some significant losses at a number of hedge funds,'' said Peter Plaut, senior analyst at Sanno Point Capital Management, a New York-based hedge fund firm. ``We are likely to see the losses result in redemptions.''

Goldman spokesman Christopher Williams declined to comment about the fund's performance.

Global Alpha lost 8 percent during the last full week of July, hurt by declines in investment-grade credit and U.S. stocks, said the investors who declined to be identified. The fund fell 9 percent in July, net of fees, they said. The fund had another 3 percent drop during the first three days of August as the Standard & Poor's 500 Index fell 1.5 percent.
 
Quote from Trendytrader:

Opps looks like GS hedge fund was unhedged! Expect more hedge fund meltdowns this week.

Global Alpha lost 8 percent during ...e ass hedge fund' ? That would be fitting.
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Two Goldman Sachs funds in trouble
Computer-driven funds have suffered big losses and selling positions as a result, paper reports.
August 9 2007: 3:01 PM EDT


NEW YORK (CNNMoney.com) -- Two Goldman Sachs computer-driven hedge funds have sold some positions after taking a big hit in recent weeks, according to a report published Tuesday.

Citing sources familiar with the matter, Goldman's Sachs Global Alpha and its North American Equity Opportunities hedge fund, which are down substantially for the year, have liquidated certain positions the Wall Street Journal reported.

Calls to Goldman Sachs were not immediately returned.

The $9 billion Global Alpha hedge fund and North American Equity Opportunities, a "equity market neutral fund" with $767 million under management earlier this year, both relied on computer programs to execute trades, the paper reported.

Funds like Alpha, which was briefly rumored to be closing earlier this week, have suffered because of a combination of factors, including the fact that the computer models did not recognize the risk environment in the market, according to the Journal.

Global Alpha is now down 16 percent for the year, while North American Equity Opportunities was down more than 15 percent through July 27, according to the paper.
 
Quote from showyouwang:

Tudor has a history of catching the big crashes. Expect him to have a monster year :)
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