Bubble, Bubble Hedge Funds In Trouble
Nov 1st, 2006 | Filed under: Hedge Fund Industry Trends, Media Coverage of Hedge Funds“Trouble is bubbling up for two more hedge funds. First, hot on the heels of Amaranth Advisors meltdown…”
Institutional Investor’s “Daily ii” reports on a couple of “troubled” hedge funds. But although they are compared to Amaranth, which lost a king’s ransom, neither fund actually lost that much money for investors. In fact, the only ones who lost their shirts at these funds would have been the very people that made the most on the way up: the owners of the respective firms.
Firstly, Daily ii cites a story in the New York Times about Archeus Capital, a convert arb fund that went from $3b AUM to $700M AUM and will be giving the rest of the money back to investors by the end of the year. The paper goes to great lengths to conjure up images of another blow-up - citing Amaranth 3 times in the first 100 words.
But Archeus, a blow up? The fund was down 1.9%, is reportedly invested in highly liquid positions, and will apparently be able to return all remaining capital to investors in 2 months. Bubbles invariably end in tears. But this story ends with an orderly return of capital and minimal losses for investors.
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[…] Bubble, Bubble Hedge Funds In Trouble […]
[…] Another reason hedge fund closures make for great headlines is that unlike, say, restaurants (which are small businesses with way higher failure rates), there is confusion about the extent to which investors are impacted. As long as a restaurant doesn’t shut its doors while you’re eating there, its eventual closure is inconsequential to you. (see related posting on definition of “blow-up” written during the great hedge fund blow-up of 2006. Remember that? Neither do we.) […]