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Thursday, August 09, 2007

More Hedge Fund Problems

by Calculated Risk on 8/09/2007 03:03:00 PM

From MarketWatch: Big liquidation triggers hedge fund turmoil (hat tip barely and Gort)

The liquidation of a big hedge fund or investment bank trading portfolio is causing havoc in some parts of the hedge fund business, according to managers and investors.

Black Mesa Capital, a hedge fund firm that uses computer models to track down investment ideas, has told investors that at least one very large hedge fund or investment bank is liquidating "massive" trading portfolios, according to a letter the Santa Fe, NM-based firm sent to investors on Wednesday.

That's causing disruptions and triggering big losses among other so-called market-neutral hedge funds, Black Mesa said in its letter, a copy of which was obtained by MarketWatch on Thursday.

"Clearly, something is amiss in the markets that few in our strategy, if anyone, have experienced before," Black Mesa's managers Dave DeMers and Jonathan Spring wrote. DeMers declined to comment on Thursday.

The firm's hedge fund, which has about $1.9 billion in long positions and $1.9 billion in short positions, is down roughly 7.5% this month through Aug. 7. It could be down as much as 10% since then, Black Mesa noted.
From the WSJ: Blind to Trend, 'Quant' Funds Pay Heavy Price
Global Alpha, Goldman's widely known internal hedge fund, is now down about 16% for the year after a choppy July, when its performance fell about 8%, according to people briefed on the matter. The fund, based in New York, manages about $9 billion.

The fund's traders in recent days have been selling certain risky positions, according to these people. Early this week, those moves sparked widespread rumors on Wall Street that the entire fund might be shut down. A Goldman spokesman has said the rumors are "categorically untrue."

Campbell & Co., an $11 billion hedge fund that trades in the futures market as well as in stocks and bonds and is completely driven by such computer programs, was down 10% to 12% by the end of July.
From the WSJ: Second Goldman Hedge Fund Moves to Sell Some Positions
A second Goldman Sachs Group Inc. hedge fund has hit a rocky patch and has sold down some of its positions, according to a person familiar with the matter.

Goldman's North American Equity Opportunities hedge fund had $767 million under management earlier this year. The Fund was down over 15% this year, through July 27, according to investors and was down more than 11% in July alone. It is not known how much the fund has sold in recent days.
Tykhe Capital, a New York hedge-fund firm that manages about $1.8 billion, has suffered losses of about 20% so far in August, and is moving quickly to trim its investment positions, according to an investor in the firm briefed by Tykhe executives. The selling by Tykhe and a range of similar hedge funds is putting pressure on the holdings of a number of funds.