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October 2, 2008
Hedge Funds Eat Their Own Young
The nice thing about the hedge fund industry? Left alone in a room chasing returns long enough, it will consume itself and we will have one less over-levered bunch of crazies to worry about in this mass de-levering economy.
Today's evidence comes from a piece in the FT highlighting the various cannibalistic and generally sociopathic things hedge funds are doing to take advantage of each other's problems.
- Funds are mercilessly shorting the Goldman Sachs MVP list, an index of the most widely-held stocks among hedge funds. With hedgies selling frantically to meet redemptions, it is a way to prey on one another.
- They are watching for other funds winding down, and shorting the crap out of their holdings, hoping to thereby screw up other funds, thus causing more selling.
- It is so bad among widely-held hedge fund stocks that David Einhorn of Greenlight Capital has had a 17% down year, the worst in his fund's history, despite nailing the Lehman short trade.
As I said, the solution is to leave 'em all alone in a locked room for a while. Problem solved.
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