Sheep Watch: Hedge Funds

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Apparently slavish devotion to following the crowd and going to whatever bar everyone else is going to (Netti’s, Marquee), drinking what everyone else is drinking (Red Bull, Bud Light from a keg), and thinking what everyone else is thinking (Kappa Sig RULES) isn’t just for first-years anymore, it’s for hedge fund managers, too. And it’s not only “art, restaurants, preschools or Caribbean hideaways” that hedgies are pretending to care about just so they can show one another up and assert their virility (you have no idea the of street cred the comes with being able to say “my daughter got into the 92 Street Y”), but stuff that actually matters, like all their funds going up and down by the same amounts.
Just this past week the New York Federal Reserve issued a warning, claiming that the risks of the suspiciously named “group think” (are we at a local Scientology meeting?) are among the biggest hedge funds are the “highest since the Long Term Capital crisis of 1998.” The huge amount of leverage available --no one knows quite how much--means that these correlated positions are even larger--and riskier--than they would appear if you merely judged them by the size of their investment capital. Of course, this could all be the Fed worrying over nothing, but, for what it’s worth, we saw Dan Loeb, Stevie Cohen and Paul Tudor Jones all wearing the same pink tube top at brunch on Sunday afternoon. Make of that what you will.
Great Hedge Fund Minds Think Too Much Alike [NYP]