I remember the first show I have attendedHis famous Paimpolaise the cliff and soonI am now bilingual which is very valuableOf course the decline in GDP in the third quarter remains limited 0The ghetto appears therefore as a collective creationIn consumer goods the renewal of the offer must be permanent and university laboratories ParisI VIII XIIIThis inside Falklands war would last for a year Pressure from the markets could not relaxSecondary LBO market also holds his attentionEven the citadels does not rise to the sky. The "hedge fund" iconic Chicago, Citadel, of Ken Griffin, do stall not stars in 2008. It is not the only one. Of other veterans of this industry, such as Steve Cohen of SAC Capital, yet one of the best traders informed and the most talented of Wall Street, moving also to, at best, a year in halftone. In France, the "hedge fund" ADI, difficulty, could soon go back to OFI asset manager. Conversely, if there is a plan Paulson who passed and unanimous, it is of the "hedge fund" of the same name.
His bet on the collapse of the US housing and colossal profits he withdrew did enter its founder, John Paulson, in the legend by becoming somewhat George Soros "subprime" years
Today, in this troubled context, to some people expect a net contraction of an alternative management market estimated globally to over 2,000 billion and a resurgence of bankruptcy among the 8,000 to 10,000 funds. The rate of failure of this sector remains relatively small long-term: 5.2 per year (1999-2006) with a peak at 6.4 in 2000 and a trough to 3.8 in 2002, according to Hennessee Group. In fact, "hedge funds" mortality rate is highly variable according to the strategies (see box) and the characteristics of the funds.
It is thus very high for small "hedge funds" (see illustration). For example, only a fund out of three, with 50 to 150 million of capital in the first place, is still alive after seven years. As it grows and matures, the Fund is its probability of dying decrease that he would refrain from too use the effect of leverage (debt to leverage development of departure).
Leverage
This penchant significantly increases the likelihood of subsequent bankruptcy. This is also one of the perverse effects of the demand of investors for high-performance products but low volatility. To ensure significant yields on these strategies, managers are forced to use massive leverage. It turns against them, so against their clients, in periods of high volatility where their key brokers reduce the loans they grant them. In other words, clients have low volatility products but also higher extreme risk (the maximum losses on strong correction phases).
Market conditions
(1) Federal Reserve economists study book essential education: alternative management sector is finally enough resistant to major external shocks as September 11, 2001, for example. Is that the current crisis, multiple dimensions (banking, stock market, liquidity...) is perhaps otherwise more critical for this industry than the previous. In any case, only a dozen of iconic Fund had closed during the Russian crisis in August 1998 and 60 in the four months that followed the attacks against the twin towers of the World Trade Center in New York.
The number of bankruptcy at the height of the crises double the average as to late 2004 where the decline of the dollar had penalized the managers. The decline of the greenback phases are rather unfavourable to this industry. Market conditions also significantly affect the mortality rate of "hedge funds". Their failure rate decreases the stock or bond markets is progressing.
Example, an increase of 1 of the performance of the & Standard Poor's 500 index decreased by 4 to 5 the probability of failure of the "hedge funds". However, these actors are more likely in an environment marked by an increase in corporate default rates or an increase in volatility, which also affects their performance. In volatile markets, managers using leverage can be forced to liquidate their positions lose very quickly because of margin calls from their principal broker ("premium broker"), which lent them money. In addition, it is generally less inclined to finance these funds in these turbulent times.
"Stop" clients
However the effect of the increase in the volatility on the increase in the mortality of the "hedge funds" has significantly diminished since the end of the 1990s. A sign perhaps that "hedge funds" better manage this risk and liquidity problems that are associated with various tools. This is what we see. Managers who have more important notice of redemption than others and the minimum duration of investment longer have more chances of survival during periods of severe turbulence.
Since the beginning of the crisis, managers try in various ways to "stop" their clients in their funds, for example by offering tariff reductions if they agree to stay invested more time. When they do occur, the outputs not definitively leave the alternative management sector, far from it. They simply to invest, sooner or later, on other strategies in a substitution effect (2).
Such is the fact of the funds of hedge funds, reallocate their portfolios of a strategy to another. A strategy thus records a decrease of 6.3 average its entries for every increase of 1 of the entries in 9 other large alternative strategies.
