2010-09-21 - Hugh Hendry - Hedge Funds - Part 2

Part 2 of 3 - BBC HARDtalk interviews hedge fund manager Hugh Hendry, CIO & CEO, Eclectica Asset Management.

Category:

News & Politics

Tags:

• hugh
• hendry
• hedge
• fund
• soros
• paulson
• banking
• bailout
• financial
• risk
• capitalism
• crisis
• reform
• market

[bonfirejovi]

I don't understand how betting on an asset price to fall is any different to betting on an asset rising. How is one more evil than the other?

[pinmya]

I really don't understand how people complicate how hedge funds operate. I beg all of you people who comment on these Hendry videos - read Eclectica's fund prospectus for any of their regulated funds. It is quite clear. They are a company that takes on private money to speculate. They don't compete with banks, they operate in an absolute meritocracy. If they fail they go bust, yet if the banks mismanage risk then they are saved. How can you ever blame hedge funds?

[afro84]

@bonfirejovi Because you are pushing up the cost of debt or cost of equity of that organisation.

When a hedgie shorts a share or bond, they borrow from an organisation that is happy to hold it over the long term (i.e. is NOT looking to sell). They then sell that asset, creating more selling demand than would naturally exist in the market. This results in the organisation paying more to service their capital than they would be in a system that allowed only owners to sell.

[afro84]

@bonfirejovi Because you are pushing up the cost of debt or cost of equity of that organisation.

When a hedgie shorts a share or bond, they borrow from an organisation that is happy to hold it over the long term (i.e. is NOT looking to sell). They then sell that asset, creating more selling demand than would naturally exist in the market. This results in the organisation paying more to service their capital than they would be in a system that allowed only owners to sell.

[farnesbarnes]

The biggest risk in life is not taking any risk at all.

[optionsupdate]

shorters could have prevented pensions funds from buying into overpriced UK mortgage banks

[antonisprotopapas]

Hugh you rock my friend!

Keep on the fight..

[DavidAKZ]

@d1bx4pp Hendry is avoiding truth of speculation. While he preaches risk management, the problem that caused the so called GFC was there was no risk management of the speculative activity undertaken by banks. Naked short selling is the equivalent of counterfeiting and if anyone else undertook this, they would find themselves in jail very quickly. A surprising fact is unlike the Savings and Loans debacle, there have been few criminal prosecutions as a result.

[d1bx4pp]

The interviewers accusation that banning banks from hedge fund like activity will on;y shift the activity to hedge funds making them the threat is very ill thought out.

Of course if banks are banned from these activities hedge funds will grow - but they won't fill the gap created. Most people depositing money in a high street bank account would never knowingly take that risk with their money and rightly so.

[DavidAKZ]

According to Ben Grahams' book, 'Intelligent Investor' on value investing, number one rule is 'don't loose money' .