Yep, looks real painful to me. Mr. Larson is in agony, no doubt.
Posted on 08/21/2007 4:27:49 AM PDT by TigerLikesRooster
Hedge Funds Are Squeezed by Investors and Lenders
By JENNY ANDERSON
As summer neared, investors in Sowood Capital Management, a $3 billion hedge fund, had little to complain about.
The fund was up 16 percent over the previous 12 months. Blue-chip management was in place, and any risk was well-hedged with a comfortable cushion of financing in place, the fund said in a letter to investors.
But a rocky June turned into a calamitous July, and by the end of the month, Sowood was on the brink of collapse. As the credit market tightened, Sowood had to sell stocks to meet margin calls from skittish banks and add hundreds of millions in cash reserves.
Sowood’s manager, Jeffrey Larson, sold the rest of the portfolio seemingly overnight — at a fraction of its initial value — and embarked on what he would later describe as a “deeply painful” process of returning the remaining money to investors and shutting the funds.
As problems that began in subprime mortgage lending have expanded into the broader markets, hedge funds like Sowood have come face to face with the ghost of past financial crises: the one-two liquidity punch from banks and investors.
On the one side, Wall Street banks and brokerage firms, as they did with Sowood, have stepped up their demands for more cash and collateral as they restrict the money they are willing to lend.
On the other, jittery investors seem ready to flee at any sign of trouble, as they did from the Bear Stearns Asset-Backed Securities Fund. The fund had a solid track record, no leverage and little exposure to subprime mortgages, but after it reported losses in July, investors demanded their money and Bear Stearns was forced to suspend redemptions.
(Excerpt) Read more at nytimes.com ...
Yep, looks real painful to me. Mr. Larson is in agony, no doubt.
Sincerely yours,
so-called Marxist anti-business pig /sarc
Hedgies deserve what’s coming to them. Hopefully, bankruptcy.
Anyon who chases risk with hot money will eventually be burned. The burning restores fear to the market, without which, capital is misallocated.
Let’s the burning begin!
*
Sorry. I am sure he is a pillar of society, president of the PTA, ya-ya-ya and all that bs as well.
But anyone that wants my sympathy for the "painful" process of giving back some of their investors money while sitting in front of a 5 million dollar boat is going to be flat out of luck with me.
He got his, he needs to cut the crying act. “He ain’t trickin anybody.”
:-)
The important question hasn’t been answered: Will Chelsea Clinton’s salary and bonuses be affected? (She works for a hedge fund.. shhh)
One can only wonder if that constitutes fraud under Federal or Massachusetts law.
I don't know where you're from,Tiger (somewhere in Asia,IIRC?) but in my neck of the woods $2.5 million will buy something quite comfortable.
Well, maybe to you, it is a big deal, but I suspect it is a small change to likes of Larson. After all, he has to measure up to other more successful guys in the industry, some of whom bag $200 million a year.
They are only open to accredited investors, not the general public. In other words they are only open to people who should understand the risk.
Do you really think that Larson didn't lose a huge amount of money when the fund he managed collapsed? Do you think he is also not worth a heck of a lot less as an investment manager after the failure of the fund he managed?
Larson is likely still wealthy, but that is because he was likely smart enough to diversify his investments. That is something that any accredited investor should be smart enough to do.
He overextended his fund to bad investments and didn't maintain enough liquid assets in the fund to cover withdrawals when investors got scared. However, it's not like he hid how the funds money was invested or that the investors were uneducated common folk who didn't understand the risks that were involved.
Hedge fund managers made the mistake of underestimating how jittery that professional accredited investors would get when some of their investments didn't work out well.
Hedge fund managers can use computer models to predict risk in their investments, but what is extremely difficult to predict is when or if their investors might suddenly start taking seriously the doom and gloom media as well as the communists masquerading as economic professors that have been predicting the collapse of the free market for many decades.
For every hedge fund you see collapse, and there will be many over the coming months.... you will see your cost of every commodity around go down... These market manipulators and theives have done nothing but robbed from middle america by knowingly and willingly manipulating commodities and futures markets.
For every one you see fall, you will see gas prices drop by 5-10% at the pump.
When they start frog marching some of these criminals is when sanity will finally have returned.
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