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Getbig Main Boards => General Topics => Topic started by: Al-Gebra on September 20, 2007, 05:08:46 PM
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is the ex-fed reserve chief responsible for policies that led to this meltdown?
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some people profit.
Paulson Hedge Fund Profits; Goldman Fund Falls 16% (Update2)
By Jenny Strasburg and Katherine Burton
Aug. 7 (Bloomberg) -- Paulson & Co., the New York-based hedge-fund manager whose assets more than doubled this year to $20 billion, is posting among the industry's highest returns by wagering that declines in subprime mortgages are far from over.
The Paulson Credit Opportunities Fund gained 303 percent this year as of July 31, according to investors. Dallas-based Hayman Capital Partners Subprime Credit Strategies Fund has done even better, climbing 305 percent.
``Hedge funds are well positioned to take advantage of the wide price disparities caused by volatility,'' said Mathieu Klein, chief executive officer of Paris-based investment adviser Darius Capital Partners. ``There are many opportunities created by this market.''
The Paulson and Hayman funds have trounced competitors, many of which got caught by the decline in debt markets. Goldman Sachs Group Inc.'s $9 billion Global Alpha hedge fund fell almost 12 percent in the two weeks ended Aug. 3, extending this year's drop to 16 percent.
Hedge funds globally returned 0.49 percent in July, according to a report today from Chicago-based Hedge Fund Research Inc. The gain, based on a sample of managers among the 6,500 surveyed, brought the average 2007 advance to 8 percent. Macro-fund managers, who wager on trends in stocks, bonds and currencies worldwide, trailed peers in July with a 0.34 percent increase, bringing their returns to 5.9 percent on the year.
Risks Rise
Mortgage and corporate bonds fell as defaults by homeowners with the lowest credit ratings reached a 10-year high, and the difference in yields between U.S. Treasuries and the riskiest corporate debt increased by almost 2 percentage points since the beginning of June. The swings caused the collapse of two hedge funds managed by Bear Stearns Cos. in June. Sowood Capital Management LP, run by a former manager of Harvard University's endowment, is shutting down after a 60 percent loss last month.
Two other Paulson funds, one that invests in companies that are merging and another that buys and sells securities of companies going through changes such as mergers, spinoffs or bankruptcies, have returned 43 percent to 60 percent this year. Those funds also wagered that subprime mortgages will fall further. Founder John Paulson, 51, who was previously a managing director at New York-based Bear Stearns, declined to comment through a spokesman.
An index of credit-default swaps tied to 20 subprime mortgage bonds rated AAA and created in the second half of 2006 fell 1.8 percent to a new low of 88 on Aug. 3, according to index administrator Markit Group Ltd. The ABX-HE-AAA 07-1 index dropped more than 11 percent since June, suggesting a similar decline in the value of the bonds.
`Feet First'
Kyle Bass, managing partner of Hayman, told investors in a letter sent last month that he expects mortgage defaults to increase. Hayman's Subprime Credit Strategies Fund climbed 107 percent in July.
The flagship Hayman Capital Master Fund rose 60 percent in July and 149 percent for the year. It bet on falling subprime mortgage-backed securities and corporate credit. The fund also bought non-U.S. stocks and debt, and wagered that U.S. consumer- based equity, preferred shares and debt would tumble, according to the letter.
``There will be a `re-pricing' of risk on a global scale that will mean more credit funds being carried out the door feet first,'' Bass, 37, wrote in his letter. He declined to comment on the firm's performance.
Hedge funds are largely unregistered pools of capital that cater to wealthy individuals and institutions and allow managers to participate substantially in profits from investments. Their assets more than doubled to $1.7 trillion in the past five years.
Goldman Fund
Passport Global Master Fund, managed by John Burbank III, 43, climbed 36 percent in the month and has gained 101 percent for the year, investors said. Marcela Anongos, an investor relations contact for the $2.3 billion firm, declined to comment.
The declines at Goldman's Global Alpha fund were caused by wrong-way bets on U.S. stocks and investment-grade debt, investors said. This year's loss in the fund, managed by Mark Carhart and Raymond Iwanowski, both 41, follows a 9 percent drop in 2006.
Global Alpha lost 8 percent during the last full week of July. The losses were magnified because the fund borrows money to make its trades. The fund finished the month down 9 percent, net of fees, investors said.
The fund had another 3 percent drop in the first three days of August as the Standard & Poor's 500 Index fell 1.5 percent and credit spreads widened.
Christopher Williams, a spokesman at New York-based Goldman, declined to comment on the fund's performance.
Equity-Hedge Strategy
Managers using a so-called equity-hedge strategy earned returns close to the industry average last month, gaining 0.45 percent to finish up 8.61 percent on the year, according to Hedge Fund Research. The strategy is the industry's most popular, accounting for more than a quarter of assets. Equity- hedge managers bet on rising stock prices while trying to cut risks by choosing stocks or options they expect will decline.
Losers last month included merger-arbitrage managers who invest in securities of companies going through mergers and other corporate events. They declined 2.04 percent, finishing July up 3.78 percent on the year, as investors shunned riskier debt such as subprime mortgages and bonds used to pay for leveraged buyouts.
FUND/(MANAGER) JULY % YEAR-TO-DATE %
Global Alpha -9.0 -16.0(1)
(Goldman Sachs Group Inc., New York)
Paulson merger arbitrage 11.8 43.0
Paulson event arbitrage 23.7 60.0
Paulson Credit Opportunities 76.0 303.0
Paulson Credit Opportunities II 56.0 150.0
(Paulson & Co., New York)
Hayman Subprime Credit Strategies 107.0 305.1
Hayman flagship 60.3 149.1
(Hayman Capital Partners, Dallas)
Passport 35.8 100.7
(Passport Management LLC, San Francisco)
(1) Includes losses through Aug. 3.
To contact the reporters on this story: Jenny Strasburg in New York at jstrasburg@bloomberg.net ; Katherine Burton in New York at kburton@bloomberg.net .
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why can't he just keep his yap zipped. he pretty much got us here. douchebag. and now he's running around stirring fear just so that he can keep his name in the papers. douchebag.
Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control.
"It's a difficult situation, there is an enormous overhang on the real estate market," Greenspan was quoted as saying. "Many buildings which just have been finished can't be sold ..."
"So far, prices have dropped only slightly. But it was enough to cause alarm around the world," he said. "Prices are going to fall much lower yet."
"However, it is too early to answer the question about a recession. We simply don't know yet. It depends on how flexibly the economy can react," he said.
Greenspan said deregulation and the introduction of market economies in the former Communist bloc after the Berlin Wall fell in 1989 had caused a global boom and a worldwide reduction of interest rates, which both helped fuel the property bubble.
"There is no doubt about the fact that low interest rates for long-term government bonds have caused the real estate bubble in the United States," he said.
"The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure," he said.
"Nobody could do anything about it, neither us nor the European Central Bank. We were powerless," he said.