HT to Naked Capitalism.
Sunday, September 28, 2008
Are hedge funds the next class of financial institutions to start collapsing? They face record demands for redemptions and are highly geared. Their share prices are taking a hammering. Who would want to invest in them these days? High fees and lots of gearing like sub-prime mortgages are acceptible when asset prices are increasing since investors can always at least get their money back. Now they cannot. This crisis has a long, long way to run and the $700b bailout, even if it is eventually passed by the US Congress, is not going to resolve things entirely.