Rumors have been swirling around about two separate hedge fund meltdowns. According to one set of rumors a multi-strategy hedge fund facing impending doom due to leveraged bets in credit derivatives. Entirely different sources have mentioned a major meltdown from natural gas bets. DealBreaker calls to some of the usual suspects could not confirm the identities of the allegedly troubled funds.
And we’re not naming the names being whispered because life is hard enough without getting called out on DealBreaker as a meltdown candidate when things might be going just fine.
Both rumored meltdowns are plausible given recent market movements. The credit markets have been rocked by a level of volatility unseen in recent times. Earlier today Bloomberg reported that many large financial institutions believe that hedge funds are using too much leverage to finance credit derivative investments, according to a Fitch
Ratings survey of 65 banks, insurers and money managers.
Natural gas futures prices are flat to down, and the spread between summer-winter season is narrowing. The spreads in future contracts fell from $2.50 to pennies in two weeks. Similar movements in the markets for natural gas futures helped bring down Amaranth last year.
If you’ve got a likely candidate for either rumor—natural gas or credit derivative blow-up—feel free to leave a comment below or email us at tips@dealbreaker.com
Derivatives Banks Concerned by Hedge Fund Leverage Bloomberg]
Posted by abe , Jul 17, 2007 6:45PM
Not naming names? Very undealbreakerlike, feeling okay? If you bastards are getting out of the rumor mongering business the terrorists (and Solengo) have won.
Posted by , Jul 17, 2007 7:12PM
i'm starting to like you guys.
Posted by Dave Chappelle , Jul 17, 2007 8:00PM
Basis Capital Funds Management
Posted by jake , Jul 17, 2007 9:14PM
yeah wtf no names?
Posted by homer J simpsons , Jul 18, 2007 3:00AM
No it's not basis cap, this is public information that they are melting down.. Must be somebody else!
Posted by Dreamer , Jul 18, 2007 4:04AM
Could it be Tom Hudson? I mean I know he hasn't traded either NG nor credit derivs at Pirate but I guess a man can hope, can't he?
Posted by , Jul 18, 2007 7:35AM
you post a rumor like this every few weeks, nothing ever comes of it are you just fishing??
Posted by , Jul 18, 2007 7:35AM
you post a rumor like this every few weeks, nothing ever comes of it are you just fishing??
Posted by , Jul 18, 2007 7:38AM
ps if you already have the rumored names why do you want us to speculate on them? seems cruel.
Posted by , Jul 18, 2007 8:07AM
natty...not a meltdown. Just a little problems with the cftc and douchebag management overselling AUM.
Posted by John Carney , Jul 18, 2007 8:38AM
Hey guys,
The questions you raised in comments were fair enough so I'll take a moment to address them.
1. We didn't name names because we honestly didn't have enough basis to build on. We're not going to impugn the reputation of some fund manager just because someone can spell his name in the same sentence as meltdown.
2. This is a bit of a fishing operation. But not in the way you implied. We heard two different rumors and spent several hours trying to get to the bottom of them. When we get stuck without any further substantiation, we decided to go ahead and see if any of our readers had more information.
3. The point that "nothing ever comes of it" isn't quite fair. See, for instance, our mid-May reports of rumors of a troubled hedge fund. We never got to the bottom of that one but three weeks later, the manager of those now infamous Bear Stearns hedge fund sent a letter to investors telling them that the funds had taken major losses in April. The details don't match what we were hearing and this could be purely coincidental, of course.
4. We think there is a value to reporting that a rumor is going around. If lots of people are talking about something it can take on a life of its own regardless of the underlying reality. So we think that it makes sense to report on the rumor. We just try to make clear that we're not substantiating the rumor or claiming it's true. Just that it's going around. We think our readers are sophisticated enough to understand this distinction.
Posted by Bubba , Jul 18, 2007 8:48AM
Yea, you guys leave John alone! Notice he didn't say it wasn't Tom Hudson, that should give us all hope that it very well may be....
Posted by abe , Jul 18, 2007 9:46AM
What about the children? Won't somebody please think about the children?!
Posted by pirate emeritus , Jul 18, 2007 9:47AM
tom is actually doing fairly well this year i believe. i wont comment on his character, but realistically the only problem with that hedge fund was compensation. everything else was on point.
Posted by , Jul 18, 2007 9:52AM
Thanks for following up JC.
i'm surprised nobody has said yet it is syks
Posted by Carl Icon , Jul 18, 2007 10:00AM
If Sykes' fund fails it would've been above the Onion's fold.
Posted by , Jul 18, 2007 10:54AM
Fine, right now hearings its Lehman
Posted by , Aug 16, 2007 1:17PM
Caxton?