3 ms·
I don't work in hedge funds and have only a superficial understanding, but it seems the operative word of "hedge" was completely ignore here. He plowed a huge c
by tootie 6y ago
I don't work in hedge funds and have only a superficial understanding, but it seems the operative word of "hedge" was completely ignore here. He plowed a huge chunk of his positions into two companies and didn't offset with any swaps or other risk absorbers. This seems like downright malpractice and not just a bad luck.
- bidirectional 6y agoEh, all is fair in love and war. The bank are charging a risk premium on any transactions with him, it's their fault if they underestimate it. It's a family office, not a hedge fund taking outsider capital, so he's entering into transactions with willing counterparties using his own money.
- dcolkitt 6y agoArchegos was hedged. All of its long positions were matched with short index futures, and the fund was running at or near market neutral. Hedging doesn't mean zero risk. It just means removing the risk of whatever it is being hedged. In this case it wasn't a general market decline that took out Archegos. It was a decline in the specific basket of stocks they were holding relative to the broader market.