CNBC and other media sources are reporting that a number of hedge funds are collapsing under the weight of poor performance and massive fund redemption. Given the market volatility in credit, sick, bond and currency markets, it was only a matter of time before we started to see this occurrence.
CNBC reported the following today:
Citadel confirmed to CNBC that its flagship Kensington and Wellington funds, which hold around $15 billion in assets, are down between 26 percent and 30 percent so far this year.
But Chicago-based Citadel denied rumors that it’s having difficulty meeting margin calls and is facing mass redemptions. The firm also denied that it’s unwinding any positions.
Highland, on the other hand, is unwinding positions, according to traders with knowledge of the activity of the big hedge fund company, which has $14 billion under management.
Look through the related posts below to see my warnings that this was going to eventually occur. I particularly saw the whipsawing in currency markets as a major event. But, losses on convertible bonds and corporate bonds due to the recent market panic were also contributing factors.
Hedge Funds have provided out-sized returns in part duew to high leverage. However, leverage cuts both ways and we are now seeing it cut to the downside.
Related posts
Hedge Funds
Dollar weakness
The dollar rally spells trouble for some investors
Quote of the day: 10 Aug 2008 – trickier than LTCM
Corporate defaults mean more hedge fund blow-ups
Source
Hedge Fund Woes: Troubles at Citadel, Highland – CNBC