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BlueMountain Fund Unwind Marks Top Of "Easy Money" In Fixed Income
BlueMountain Capital, Stephen Siderow's fixed income fund, is liquidating one of its credit funds opened during the credit crisis, and returning capital to investors on the premise that the easy money has been made, and that the peak in the market is behind us. "We’ve captured most of the big opportunity,”
BlueMountain co-founder Stephen Siderow, 42, said. “It isn’t
going to happen again anytime soon and that’s why we urged our
clients to move on.” Instead, Bloomberg reports, the fund is now urging clients to invest their money into other funds of the hedge fund, presumably the "less than bullish ones."
BlueMountain last month returned money to investors from a
$100 million two-year loan fund that gained 34 percent since its
inception in March. Silverback Asset Management LLC is giving
money back from its $210 million two-year convertible-bond fund,
the firm said. Highland Capital Management LP said it liquidated
a November 2008 fund that gained 138 percent before fees after
investing in collateralized loan obligations.
Hedge funds and money managers are cashing out after assets
from junk bonds to convertible debt had record gains last year,
following unprecedented losses in the wake of bankruptcy of
Lehman Brothers Holdings Inc. in September 2008. Debt markets
soared in 2009 as central banks lowered interest rates to near
zero and governments globally sought to avert the failure of the
world’s largest financial institutions with capital injections
and lending guarantees.
Of course, the implication is that someone is buying these assets that are getting unwound. That someone is the last person to join the party and to end up with the hot potato. The money in debt, and especially high yield, has now been made, courtesy of record fund inflows into fixed income funds during 2009.Many observers have speculated that high beta credit names were in many ways a leading indicator to equities over the past 10 months. If the lights on the fixed income party are getting turned on, this can't have good implications for equities.
“In terms of performance, it was a once-in-a-lifetime
opportunity to invest in credit at the start of 2009 due to the
excessive risk aversion in the markets,” said Eric Attias,
chief investment officer of Paris-based Nexar Capital Group,
which invests in hedge funds.
We would add that unprecedented fiscal stupidity and the last bail out afforded by fiat destruction in a Keynesian world were the primary reasons for this "opportunity" - all this dramatic rise in fixed income did was provide an NPV upside for the decades of Japan-style economic decline as America will now be forced to digest the trillions in additioanl debt it will have to issue in order to have afforded hedge fund like BlueMountain a 10 month opportunity of a lifetime. That unborn generations of Americans will be sponsoring the fund's purchases of assorted luxury vehicles does not seem to figure into the question.
“The easy money is over,” said Nexar Capital’s Attias.
Indeed.
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We have a saying around here: "When you make money, take money." Because if one doesn't, sooner or later, odds are that Mr. Market will rise up and snatch it back (it's called exposure). This young man is smart. He's identified when the odds are with him, and when they are not. He's stepping aside and leaving others engage in the well known "greater fool theory." There is a lesson in this post. Know your risk, and know when the odds of winning are in your favor. Then, adjust your risk accordingly. Good luck everyone.
now where oh where do we store our profits?? short term run up of the dollar and then mass exit when the printing press hits the streets
Load up on TBT, the double short bond fund. Or sell bond futures. CDS spreads rising are the beginning of higher rates. When the dollar stops rising, the rotation out of stocks into Dollar and Yen will unwind. AT that point I would guess that rates have been pushed low enough by a flight to quality, that it will be hard for them to go any lower. Then all you need to hedge is you dollar exposure.
Bravo easy money over.
Hard money coming...
http://www.jubileeprosperity.com/
If higher risk fixed income is about to reverse, and stocks are reversing, that implies a de-risking (makes sense with the sovereign problems)does the money go into treasuries? gold?
well i moved 2/3 of my 401k back into the dollar (hardly any real choices there) and my broker account leveraged into gold.. but I might switch that into what Mike is sellin.. (TBT)
$100 mill hedge fund is small potatoes in the loan business. The smallest assignable piece is usually 2mm. So, $100 mill is almost insignificant. Granted, these guys are the "best in class" in CDS.
Also, last year these guys suspended redemptions on their other funds. Maybe, people want their cash back.
Aren't the fixed income lights being turned off??? Otherwise, great stuff.
make hay while the sun shines.
save for a rainy day.
a penny saved is a penny earned.
penny wise, pound foolish.
a fool and his money are soon parted.
don't look a gift horse in the mouth.
monkey see, monkey do.
a sucker is born every minute.
do unto others...
come one, come all.
possession is nine-tenths of the law.
trust me.
yawn......
40muleteam borax
Guaranteed the people buying HY today are pension funds who are gambling to hit unrealistic return hurdles.