Sep 15

Hedge Funds and Banks straining

Last night UBS lost $2billion due to another “rogue” doing unauthorised trades and as reported last night by Zero Hedge, Goldman Sachs are shutting down their famed (or perhaps infamous), Global Alpha hedge fund. The obvious question posed by Zero Hedge is whose next? and I wonder which Australian fund(s), if any, will be hit.

Since the GFC when numerous Australian funds (mortgage, credit, hedge funds, and illiquid property funds) froze to redemptions, these funds have struggled as investors have sought increased transparency and lower cost investments (index funds, term deposits, and annuities). Because Australian investors haven’t jumped backed into these potentially illiquid and high risk funds I don’t there’s too much likelihood of another round of fund problems here. There may be the occasional hedge fund blow up (in fact I heard anecdotally about a start-up options trading hedge fund that blew up last month just a matter of months after starting), but given the relatively conservative appetite in Australia I think all should be ok (although Europe and US economies are still in deep doo-doo as is the Euro-sovereign and Euro currency situation)…I’ll let you know if I change my mind!

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