Paulson tells G7 let markets regulate hedge funds

NF Reporter · 02-10-2007, 01:51 PM

Reuters - U.S. Treasury Secretary Henry Paulson made clear on Saturday that he thinks any risks posed by lightly regulated hedge funds can be handled through market discipline without adding heavy government regulators.

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waltky · 10-02-2008, 02:18 PM

Financial meltdown reverberatin' to hedge funds...

Hedge fund blues are just beginning
October 2, 2008: When even a profitable fund closes, that's a sign there's trouble ahead.

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The domino nature of the looming hedge fund crisis is neatly illustrated by the troubles of a high-flying New York fund with a niche that was supposed to be recession proof. Laurus Capital Management, which manages $1.6 billion and has posted nearly 16% annual returns since 2001, is shuttering an $800 million portfolio after its largest investor said it would withdraw $300 million.

While investors are fleeing capital markets globally as both credit and equity investments falter, Laurus' strategy of making private investments in public entities, known as PIPEs, was thought to be largely immune from this cycle. The fund buys bonds and warrants convertible into equity in small companies whose stocks trade for pennies a share. In a credit crunch, a PIPEs fund should be able to find attractive would-be debtors in need of capital.

And to a point, the PIPEs strategy has worked, with Laurus returning about 2.7% through the end of August while hedge funds generally have shown losses this year. The problem is that big institutional investors are growing unsure about hedge funds in general, and the big investor in the Laurus fund, the alternative strategies unit of Northwestern Mutual's Russell Investments, has suffered losses in its hedge fund portfolio.

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waltky · 10-10-2008, 03:46 AM

Granny says its a gubmint conspiracy to buy up all the banks...

Treasury May Opt to Invest in Banks
October 8, 2008 WASHINGTON - Paulson May Exercise Option in Bailout Bill to Take Stake in Banks

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The U.S. Treasury Department is considering taking ownership stakes in many U.S. banks in a bid to restore confidence in the badly shaken financial system, the New York Times said. The moves would come after Treasury has had little success in unlocking frozen credit markets, The Times said on its website, quoting government officials. Treasury officials told the newspaper the $700 billion bailout bill gives them the authority to inject cash into banks that request it, a move that would quickly strengthen banks' balance sheets and hopefully persuade them to resume lending.

In return, Treasury has the right to take ownership positions in the banks, including healthy ones. The bank recapitalization plan, in its preliminary stages, has emerged as one of the preferred options being discussed in Washington and on Wall Street to address concerns banks have about lending to one another and to other customers, the paper said. Treasury Secretary Henry Paulson spoke of the department's new authority to inject capital into banks as one of the powers in the new bailout law.

"We will use all the tools we've been given to maximum effectiveness," he told a media conference on Wednesday, "including strengthening the capitalization of financial institutions of every size." Treasury officials worry that if not done properly, government purchases could alarm bank shareholders by appearing to be punitive or be interpreted as a sign that target banks were failing, the paper said. The bailout law calls for limits on executive pay when capital is injected into a bank and bars banks from paying its chief executive a "golden parachute" package.

More ABC News: Treasury Considering Taking Stakes in Banks: Report

waltky · 10-17-2008, 10:53 PM

Gettin' out while the gettin's good...

So long, suckers. Millionaire hedge fund boss thanks 'idiot' traders and retires at 37
Saturday October 18 2008 - The boss of a successful US hedge fund has quit the industry with an extraordinary farewell letter dismissing his rivals as over-privileged "idiots" and thanking "stupid" traders for making him rich.

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Andrew Lahde's $80m Los Angeles-based firm Lahde Capital Management in Los Angeles made a huge return last year by betting against subprime mortgages. Yesterday the 37-year-old told his clients that he had hated the business and had only been in it for the money. And after declaring he would no longer manage money for other people, because he had enough of his own, Lahde said that instead he intended to repair his stress-damaged health; he made it clear he would not miss the financial world. "The low-hanging fruit, ie idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking," he wrote.

"These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government," he said. "All of this behaviour supporting the aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America." Lahde became one of the biggest names in the investment industry when one of his funds produced a return of 866% last year, largely by forecasting the US home loans industry would collapse.

In his farewell letter, which concluded with an appeal for the legalisation of marijuana, Lahde said he was happy with his rewards and did not envy those who had made even more money. "I will let others try to amass nine, 10 or 11 figure net worths. Meanwhile, their lives suck," he wrote, citing a life of back-to-back business appointments relieved only by a two-week annual holiday in which financiers are still "glued to their Blackberries". Lahde's retirement came amid an implosion among the hedge fund industry - some 350 of the funds have liquidated this year, according to Hedge Fund Research. His final words of advice? "Throw the Blackberry away and enjoy life."

So long, suckers. Millionaire hedge fund boss thanks 'idiot' traders and retires at 37 | Business | The Guardian