[loco5niner]

I really don't like this guy, seriously he's a shark (he's probably right, but what a jerk): "If you know somebody has to liquidate, the best thing you have to do, unfortunately, sadly, Darwinian is to go sell all the positions you have in common, then start shorting everything they have. It accelerates the downfall as quickly as you can." of course then he says 'It's nothing I would ever do...'

[infecto]

That’s truly the playbook when you are on the other side of a levered firm though.

[loco5niner]

Yeah, probably. Its too bad.

[ymolodtsov]

If there's any purpose in hedge funds as a structure it's that they provide liquidity for the market. So it's in everyone's best interest to let them do price discovery against each other.

[bagacrap]

It's not just liquidity. Price discovery helps everyone. The earlier the correct price is discovered, the less we're all screwed when the bubble pops. I think they're rewarded too well for the function they serve but whaddya gonna do.

[ymolodtsov]

I mean, most of them underperform S&P, at least after fees.

[bagacrap]

I think on average they match a typical 60/40 portfolio on a risk adjusted basis. The goal is less to out perform long term and more to avoid big downturns (hence "hedge").

I do think there are some firms that have the skill to out-perform long term, but then the average is dragged down by ones like the subject of this article.

[infecto]

Why too bad? This is how the market ultimately comes to the right price.

[literalAardvark]

Not really.

Using leverage has risks that you're supposed to understand before you do it.

It's not a free lunch, unless you're putting the sharks' interest ahead of yours. Or clueless, which was the case here, as L.A. is not a trader and has no business running a fund.

[quickthrowman]

Too bad for the people that were overleveraged? I don’t see why, they assumed too much risk and lost. This isn’t a WSB guy blowing up, it’s a collection of capital from sophisticated investors that understand the risks.