Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (288)	10/1/1998 10:22:00 PM
From: Stitch	Read Replies (1) \| Respond to of 2794

Clark; <<Once the domain of wealthy investors, hedge funds are now attracting pension funds, endowments, foundations and investment managers who invest in a group of hedge funds. These institutions, which accounted for only 5 percent of the hedge funds' assets five years ago, now account for about 80 percent of assets. >> Is the author serious? Pension funds? Maybe it is time to define "hedge fund" further. My plebeian understanding of hedge funds would suggest there ought to be a law preventing pension funds from using them as an investment vehicle. <<my opinion of the European Union is that in a world of emergent trading blocks the European Union will have to come about and England will have to join.>> Just as an aside, based on a straw poll of 4 people at dinner last night, the average UK citizen thinks of the EU as dilutive. Best, Stitch

To: Worswick who wrote (288)	10/2/1998 1:40:00 AM
From: Enigma	Read Replies (1) \| Respond to of 2794

Worswick - I am trying to get to the bottom of the business of the collateral offered by hedge funds to lenders - it is said of one situation that most of its loans are 'collateralised'. I could understand it if a hedge fund were to borrow $1million and buy a bond for a million - it could, I guess, offer the bond as security. This transaction has not initially increased the equity of the fund's unit holders - only the profit on the sale of the bond would do this. But what happens if the fund goes out and buys $20 million worth of bonds - on the basis of borrowing from a broker at 5% margin. The 'collateral' offered to the original lender becomes the 5% margin account with the broker!. I'm not dealing with derivatives here I realise, trying to use a simple transaction as an example - but it makes me think that in reality there can be no actual collateral offered to the original lender at all. I can't see how there can be because the fund's hands would be tied if it wants to leverage its loan - which in the case of LTC it must have been doing many times over. E