Several interesting themes on hedge funds around this week.
Robert Peston at the BBC, notes that the conversion of Morgan Stanley and Goldman into commercial banks will inevitably have led to a massive squeeze on their prime brokerage lending operations:
So the US authorities should have known – and presumably did know – that by allowing Morgan Stanley and Goldman to become banks they were in effect forcing a serious contraction in the hedge-fund industry, which in turn would lead to sales of all manner of assets held by hedge funds and precipitate turmoil throughout the financial economy.
It’s not all about bank deleveraging though:
Even for a billionaire hedge-fund titan, losing $30 million an hour has got to be a bummer.
That’s what Eddie Lampert, the chairman of Sears Holdings, has experienced with just his nine largest holdings since Sept. 19 – over just 26 trading days.
Lampert’s ESL investments has seen the value of its holdings in Sears Holding, Autozone and Citigroup – among others – fall by $5bn since mid September.