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Politics : High Tolerance Plasticity
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To: cnyndwllr who wrote (56)2/21/2001 6:44:23 PM
From: jim_p  Read Replies (1) of 23153
 
Ed,

I received this from a friend who manages a large fund and wanted to share it with the new thread.

Dear ,

I travelled to Switzerland last week and spoke at a hedge fund conference in
Geneva before heading up to Zurich.

Some impressions:

>>The proliferation of hedge funds evident from this conference is really
quite staggering. It suggests to me a shakeout in the future and tremendous
market volatility in the interim.

>>As the risk free return sinks lower and lower, the demand for performance
with minimal downside is growing exponentially. This combination of forces
is pushing a wall of money into hedge funds which are perceived to be able
to provide supra-normal returns with no risk.

>>There are more than 6000 hedge funds of all types which account for $400
billion in assets. This does not include leverage.

>>Long-short equity funds are the "flavor of the month", as their managers
market the funds as effective ways to control downside risk. However, the
speed with which money has rotated out of tech and into non-tech, the
prospect for more sector shifts and the potential for leverage all point to
significant volatility ahead.

>>What is remarkable is the number of times a stock changes hands. In order
for a hedge fund to short a stock, the stock first needs to be borrowed.
Initially, this comes from a large fund but the stock then gets recycled.
The average velocity of circulation is about 10 times. The risk with all
this is the possibility of fund redemption triggered by a bear market which
forces hedge funds to cover what could be money losing positions.

>>More comments on Europe in this week's fax.

Best Regards
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