Emerging Markets Investments Were Winning Bet for Several Hedge Funds
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>> 40 minutes past the hour. let’ s take a look at the u.s. equity indexes. we are off lows of the session. the d ow is down about 32, the s&p is losing just about five. and the nasdaq composite is lower by almost four in trading. let’ s take a look at treasuries as well. of course, the housing data came out a little weaker than expected when you look at the number of homes sold and the revisions from September. the 10-your of is — is up one full point. we have the two-year note? 3.92% yield. the subprime crisis and the subsequent credit crunch has not been all that bad. the trauma helped some hedge funds generate big returns and huge performance fees for other managers in the first nine months of the year. Bloomberg market magazine dug through the data and created an exclusive hedge fund rating and our reporter joins us from Portland to tell us which funds and fund managers are on top and how they got there. a lot of people thinking the subprime fallout is not such a good thing unless you make money from. what kinds of investments with these funds making and how was their timing in getting it right? >> that is the thing. everyone has been expecting a housing slowdown for quite some time, but these guys got the timing right and got the investments together right in time for the big drop. what they used was something called credit defaults swaps. those allowed them to really capitalize — derivatives but allow them to capitalize on a decline in securities. they loaded up on hose and it have been a huge home run. let’ s talk about the top ones. the top one really got it right — what kind of street credibility has given john paul’ s son and his partner? >> someone describe them god’ love been around, not newcomers. — someone described them as a guy is and who have been around. the way i understand it that these people decided it was time, learned how to trade the stuff and put on the trade and of the main home run. they made $2.7 billion in fees in the first nine months of the year. if they keep the streak alive they get to divvy up that pot, and that is our estimate, but between their staff. >> the next prodigy, any hints of from those who know paulson – the next strategy? >> this is interesting because he doesn’t say in letters that there is going to be a time to go in — does say in the letters that there is going to be time to pick through and really take a look at all of the mortgages behind these securities. you throw out the rating agencies opinions and began an figure out what is worth buying. i think that is what he is going to do — that is a gas, but as what he indicated. >> it looks like a team did begin. emerging markets — some funds generated great returns putting money in those areas. will emerging markets hedge fund stay on top of the next few months? >> it is surprising, but if you are in hedge funds and been in emerging markets, you had a great 3 year and four year run, and it is a place where people are making a lot of money. again, successful ones seem to be people were doing bottom-up stock-picking, buying stocks in china, japan, that had very good runs. so, yes, if the past is any indication of future performance, this could go on. >> Anthony, a lot of the funds but end up on top usually require that investors pay a lot in fees. who has done the best in that respect? >> in fees? >> yes. >> that is john paulson, they were way out in front just because they had so much money in this mortgage play, and came home for them. they were up something like 470% in the first nine months and the year, so if you of a few billion in assets and taking 20 percent of the gains, when you quintuple the money, that is where those fees come from. >> definitely. tell us a little bit more about the ranking you use in terms of who came out on top? >> this ranking took a whole universe of hedge funds. there are a ton of them. not all are completely visible and not all share their performance. but what we did is get the ones we could, but the performance and asset, apply their formula. the 82% of assets to keep the lights on and they take 20 percent of the gains — they take 2% of assets to keep lights on. and then by who has the biggest fees. we missed some people. some people who have made a killing that we will never hear about. >> and if you want to read more, check out the January edition of Bloomberg’ s market magazine which hits stamp on December 11 — Bloomberg’ s market magazine. just ahead, how much are Americans losing in home equity? Goldman Sachs have numbers. we will hear from them when we come back.
Tags: Hedge Funds, Mortgage Implosion, Mortgage News, Mortgage Video, Subprime Implosion, Subprime Mortgage Industry
