Yesterday’s sudden drop in US Treasury yields has caused chaos for hedge funds betting on higher interest rates and an improving macroeconomy, according to the Financial Times.
Tiger Management alumni Rob Citrone, Philippe Laffont and Chase Coleman, nicknamed the “tiger cubs,” have all been hit hard by falling technology stocks, while hedge fund managers that positioned themselves on the side of tax-driven mergers and US housing finance have been sorely disappointed. Perry Capital, Owl Creel, Paulson and Pershing Square had all bet on common or preference shares at Fannie Mae and Freddie Mac in the belief that their equity value would be restored by a lawsuit brought against the US government, but this was dismissed by a court earlier this month.
Carlyle Group-controlled hedge fund Claren Road has seen credit opportunities fall by 11% this month and, across the board, October is shaping up to be even worse than September, when hedge funds lost 0.75% overall.
Dramatic declines in oil prices are also causing heavy losses, as many funds had been buying up energy stocks and bonds.
“Oil stocks and bonds are both under pressure and because of their earlier strength these are relatively chunky positions for hedge funds,” commented Mino Capossela, head of liquid alternative investments for Credit Suisse Asset Management.
A total of US$4.88 trillion of debt has been sold so far this year reports Dealogic, close to the level of 2007 when US$4.91 trillion of bonds were issued over the same period.
The German industrial gases group has ended talks with its US peer on a potential union to establish a market leader.
The US exchange said it will introduce incentives from next month to make lower-volume exchange traded funds easier to buy and sell.
A survey of 1,000 merger and acquisition dealmakers finds that seven in 10 expect Brexit uncertainty to limit the number of deals.