Does the "so the hedge funds don't get too rich" thing- the current justification for the idea of wrapping toxic assets up in a few big mutual funds- sound a bit like... I don't know... bullshit to anyone?
There is political utility in enlisting Main Street investors. It could quell criticism that the government is giving a gift to hedge funds and other Wall Street titans, which helped spawn the financial crisis in the first place and which are now being tapped by Washington to help buy toxic assets.
This assumes lots of facts not presently in evidence. For instance:
- Hedge funds want to participate in the sort of programs that are characterized by the PPIP's structure. (Not so far as we are hearing).
- That there actually are many "hedge funds" that qualify for programs like this after being screened for the $10 billion in current market value AUM limit.
- That anyone is going to make money waiting praying for these assets to appreciate sufficiently to provide decent annualized returns.
This looks quite a bit more like an opportunity for funds deeply under their high watermarks to extract some management fees from the public. Like the reason California managed to raise anything near (much less over) their $4 billion target. Like we are going door to door asking people to buy war bonds.
Call us cynics.
Fund Firms Look to Offer a Toxic Taste [The Wall Street Journal]