Two ways to present “balance” in 130/30 discussion
Oct 25th, 2007 | Filed under: 130/30, Media Coverage of Hedge Funds130/30 “more appropriately referred to as 1X0/X0″ says leading research institute
Edhec’s Walter Gehin has been busy this month. On Wednesday, we told you about his survey of the hedge fund replication industry. Today, we take note of this 1X0/X0 “state of the industry” report by Gehin. Once again, he does the heavy lifting by listing out recent major fund launches that have been attracting “strikingly large inflows”. And once again, he produces a succinct and dispassionate article that summarizes many of the recent academic papers and media articles on the subject without needless editorializing.
By the way, when noting that there is nothing particularly magical about the “30″ in 130/30, Gehin says:
“In the USA, the Regulation T limits gross exposure to no more than twice the investment capital. European Union regulations likewise restrict market exposure to 200%. So shorting is limited to 50%, corresponding to a 150/50 fund. Managers thus have a range of configurations at their disposal, from 110/10 to 150/50. 130/30 is restrictive and is more appropriately referred to as 1X0/X0.”
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