Morgan Stanley and Goldman Sachs are linking their lending to hedge funds to the market's assessment of the credit worthiness of the investment banks. Morgan Stanley will reportedly evaluate the amount of leverage it will supply to hedge funds based on the price of its own credit insurance pricing. Goldman is said to be linking its willingness to provide loans to hedge funds based on its bond prices.
The report of both changes ran in the Financial Times. The changes would limit the ability of hedge funds to borrow from either firm if borrowing by Morgan and Goldman became too expensive, indicating a lack of market confidence in the financial health of the firms.
In one sense, this seems a practical response to volatility in the credit markets, reducing exposure to hedge fund leverage as credit markets for financial companies become unsettled. It does, however, create a self-serving dynamic for the investment banks. If hedge funds taking the view that the companies have become unstable push up CDS or bond yields on the firms, they may find themselves unable to borrow from the firms. In other words, it gives the hedge funds an incentive not to bet against Goldman and Morgan.
The FT says the plans to link hedge fund leverage to the broader credit markets has been in the works for sometime. "These arrangements for determining the size of lending commitments to hedge fund clients were being put in place before the collapse of Bear Stearns," Henny Sender writes. "But implementation has gathered pace as investment banks seek ways to guard against the sudden loss of confidence - and resulting withdrawal of market funding - that crippled Bear."
MS and Goldman change approach to lending [Financial Times]
Posted by guest , Aug 18, 2008 3:32PM
Seems pretty smart to me...
Maybe they should have linked lending rates to CDS/bond prices as well?
Posted by guest , Aug 18, 2008 3:39PM
wouldn't you not want to borrow from a firm that you thought was going to collapse and potentially need to call down any credit?
(excuse my lack of knowledge on the subject)
Posted by guest , Aug 18, 2008 3:58PM
to guest @3.39pm I believe the size of the committment would correlate to the creditworthiness of the lender. Better ratings, larger size of loan.
Posted by guest , Aug 18, 2008 4:16PM
They are using spread as a proxy for their ability to access capital markets effectively (or at least at appropriate rates). To the extent funding costs increase, the contracts allow them to reduce commitments and funnel the cash internally, preventing them from needing to go out to the debt (or equity market) and raise capital to continue to fund what would likely then be a money losing lending arrangement.
Posted by guest , Aug 19, 2008 4:51PM
Will Halaby's wf really care h ck was being sckd by another in London. UBS's OConnor a gd eg. And George, stay off the sauce.
Posted by guest , Aug 27, 2008 3:25PM
Y, J. Garofoli told market that Syrmen was damaged goods.
Posted by guest , Aug 28, 2008 4:58PM
More intersting question: why have Joe Garafoli and Thomas Korossy not been fired from KBC yet or sued? Coming soon. Watch this page.
Posted by guest , Sep 05, 2008 5:43PM
For those of you looking for a hedge fund job in Chicago, there are many. In fact, there are 165 hedge funds in Chicago alone, including private equity firms. Most of them don't post their jobs on job board, so you will need to contact them directly. You can get a list of hedge funds in Chicago, or Texas or California etc. at www.hedgefundjoblist.com
Posted by guest , Sep 05, 2008 5:44PM
For those of you looking for a hedge fund job in Texas, there are many. In fact, there are 165 hedge funds in Texas including private equity firms. Most of them don't post their jobs on job board, so you will need to contact them directly. You can get a list of hedge funds in Texas at www.hedgefunjoblist.com
Posted by guest , Sep 10, 2008 2:27PM
KBC Garafoli ?
Posted by guest , Oct 08, 2008 6:07PM
http://www.chk.com/Default.aspx?p=404
http://www.collegejournal.com/article/SB121461354298012689.html
Aubrey is sucking something currently and will come back to you once he deals with the other..
F*** idiots and FoF managers should be fired
Posted by guest , Oct 08, 2008 6:21PM
Dwight Anderson being blown intra-pantos by an underpaid Bolivian boll weevil. The corn-porn is a revelation, non senor?
http://s.wsj.net/public/resources/images/MI-AR012_WOSPRA_20080627221213.jpg
Posted by guest , Oct 08, 2008 6:29PM
Anderson is full of shit as per any of his "peers". Marketing to stupid M fckers. He will be corn-holed, as per industry practice. Follow youtube on this (+18 yrs as per law)....+ some collaborators
Posted by guest , Oct 14, 2008 2:17PM
ADI Groupe, Paris-based fund group got some horrible headlines recently for screw-ups that resulted in multiple fund closures for them. Has anyone looked at the performance of individual hedge funds they've seeded via "their "NewAlpha" platform. Losers... Fitch said as much.
Posted by guest , Dec 05, 2008 6:06PM
yes, Rauters said they were du
ds. But always suckers around and these french guys suck cock big-time. Avoid it like the plague.
Posted by DevonteK , Mar 07, 2009 3:07AM
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