The Hedge Fund Riddle …
The hedge fund industry is beaten down, locking in horror performances and running away from equities … so …
What will happen now???
First some quotes out of a Bloomberg article … to get a feeling, how bad it is 
- Hedge-fund manager David Tepper entered the third quarter with $3.1 billion of U.S. stocks and exited with $648 million, selling most holdings to reduce risk and raise cash as carnage spread across the financial markets. “We moved a lot out early because we didn’t want to lose money,” said Tepper, 51, president of Appaloosa Management LP in Chatham, New Jersey. The firm, which switched some money to bonds, has between 30 percent and 40 percent of assets in cash.
- Regulatory filings last week by 38 hedge funds with more than $1 billion in assets each show that selling and market declines cut the value of their reported holdings by about 30 percent to $273 billion.
- At least 75 funds have liquidated or halted redemptions this year. With the Nov. 15 deadline for year-end withdrawal requests now past, fund managers may be forced to unload more stocks to pay off clients.
- Atticus Capital LP, based in New York, said its holdings declined to $510 million from $8.1 billion. In an Oct. 1 letter to investors, David Slager, 36, who manages the Atticus European Fund, told investors that more than 50 percent of his fund was in cash or U.S. Treasuries after he lost 43.5 percent year-to-date.
- At Tudor Investment Corp., the Greenwich, Connecticut, hedge-fund group founded by Paul Tudor Jones, 13F holdings fell to $453 million from $5.7 billion. Jones said markets face more selling from managers. “Our concern now is less over year-end fund redemptions, as record cash balances have already been raised in anticipation, but with prospective fund closures,” Jones, 54, said in an Oct. 31 report to his clients. “This latter event represents a tipping point at which a fund’s call on the market for liquidity goes non-linear.”
- SAC Capital Advisors LLC of Stamford, Connecticut, said its holdings were $7.7 billion as of Sept. 30, down from $14.4 billion at June 30. Founder Steven Cohen, 52, had about half the firm’s assets in cash in mid-October, after his main fund fell 5 percent through September.
- Louis Bacon’s Moore Capital Management LLC said the value of its 13F securities fell 69 percent to $1.4 billion, while at Jana Partners LLC, a firm overseen by Barry Rosenstein that makes activist investments, they fell to $2.1 billion from $5.9 billion.
- Jeffrey Vinik, who once ran the Fidelity Magellan Fund, disclosed that his Boston-based Vinik Asset Management LP held $1.8 billion at Sept. 30, down from $11.8 billion at June 30.
- “Movements in financial markets were so volatile, so unpredictable and so seemingly detached from fundamentals” that many hedge-fund managers “didn’t feel they had an edge,” said Doug Peta, an independent market strategist in New York. “The best thing they could do for their investors was to pull back entirely until markets returned to more of a sense of normalcy.”
- The largest funds, including those run by David Shaw, Kenneth Griffin and James Simons, reported smaller declines in their holdings. At Griffin’s Chicago-based Citadel Investment Group LLC, holdings listed on Citadel LP’s 13F fell 11 percent to $50.4 billion. Simons’s Renaissance Technologies LLC of East Setauket, New York, reported a 17 percent decline to $37.8 billion. At New York-based D.E. Shaw & Co., the filing showed a 20 percent decrease to $45.4 billion.
Are you scared? 
The good thing … IMHO … is, that this sounds outright bearish, so to me … it sounds like a bounce in equities has to be expected … purely technically … as fundamentals are SUPER bearish …
BUT … the big problem could be the DELEVERAGING, which in no way is done already … THIS makes markets so unpredictable at the moment …
One thing seems to be sure … we have NOT seen the final bottom … and this market is nothing for the fainthearted 
Tags: deleveraging, Hedge Funds, outlook
November 19th, 2008 at 19:27
… markets go up and they go down …
… HFs blow up and falter …
… volatility is all you need …
I left the business in 2005 when the DAX Volatility was at 13/ 15. Yes. Every “spike” of volatility was drowned by the “gamma shorts” … Yes, I remember… but know …
… But know it is worth coming back!
Volatility is your friend!
November 19th, 2008 at 23:31
Volatility is like a hot woman … sometimes, you should not go for it
November 23rd, 2008 at 13:04
Taking the amount of volatility it´s more like doing it without a condom with a Supermodel which let´s say is said to have AIDS. The girl comparison would mean staying away if you weren´t a sex maniac who would look for an emotional overdose doing it this way.
But the comparison is wrong. This comparison states you can stay sane not doing it with the infected girl. But what is money (cash)? A claim against a society of which more and more people have “full AIDS” and which has legal liabilities it gave itself to take the “AIDS” from them (social welfare) thus producing half and quarter “AIDS” for nearly everyone.
So the question is more like would you do it with the girl that possibly has “full AIDS” using your arm or leg which is your part of the “quater AIDS” you have anyhow.
More economically as there are only two possible outcomes:
a) (partial) destruction of (saver´s) money by hyperinflation
b) (partial) destruction of (saver´s) money by hypertaxation/currency reform
and as sitting on the sidelines means that you will inevitably have a quater or half of your body “infected” I find it very funny that people are longing for cash. The only reason being that we all are used to measure success in money. But what if over tomorrow people will realize that there is still not sufficient real assets for all this cash??? And what will happen if the first ones realize this tomorrow?
How about dropping the hot pants banking bitch that requires that you buy her a $50 cocktail before even talking to you which you have seen with some other guys the last night and look for the working class girl which dresses nicely too but can live on a cup of rice but produces two or three and is shunned by all the other guys and then retreat to your farm and make some kids? Possibly you won´t have the illusion of the sexiest hot night but picking the working girls now on the cheap gives you lots of cups of rice for the future.
Or again (more economically): Look for the stocks that are least effected by the crisis, that produce things that people need and can earn the “one or two cups” more constantly and don´t see it like a one night stand but more like a marriage. Don´t trade the vol. Use it as a matter to get in cheap by selling long dated-out-of-the-money puts. Stay with what you bought. For a life. Pretty much of a problem for a trader. I know. But who says that traders have a right to live and earn money. They are an accepted nuissance as they produce liquidity in the markets. But there will be a lot less markets (and thus needs for traders) in the future as people will retreat to their private farms…..As disfunctional and idiotic the valuations are these days there will be a lot of thoughts about if one should allow markets at all. With lots of stock trading at 2-3 PEs and 20-30% div yields its time to buy and hold not to trade the vol. 1930 had a 100% move to the upside after the first massive downmoves in 1929. S&P 1100 would kill all traders that now have realized that it is “a sensible strategy” to short every spike. So use your brain and don´t be a trader and you will survive. Go for the big 50-100% moves and ride out the vol. You anyhow won´t be able to predict it.
November 23rd, 2008 at 20:31
Interesting view … as always controversial …
Juni 23rd, 2012 at 09:58
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