Inception Letter From Ben Bernanke, CIO Of Federal Reserve Capital, LLC
In addition to the introductory information received on the newly conceived FRC LLC, we have also learned that the fund is rumored to have a lock-up period of 1 millisecond to allow HFT frontrunners to park their securities at FRC LLC, while the traditional 2/20 payment structure will be inverted, with Bernanke paying out 2% on all AUM, and will also pay out an additional 20% to any profit (or loss) generated by the fund for its LPs.
Letter from the CIO of Federal Reserve Capital LLC
Information received since the Federal Open Market Committee met in June suggests that the economic outlook remains unusually uncertain.
Recently, market participants have become somewhat concerned about how we are going to manage our portfolio. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, we purchased $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. We also bought some treasury bill last year and are doing pretty well on that investment. About 200billion or so of this paper will be maturing by the end of 2011. It seems there are a lot of people out there that are worried about the impact on the economy of our balance sheet shrinking if this cash is not immediately reinvested. We would like to take this opportunity to address those concerns. To be clear, we have no intention of reinvesting this cash in mortgage related assets. With over $1 trillion in excess reserves out there we really don’t see how it would accomplish anything. Instead, we have decided on a new strategy; we think you will like it. We are currently in the process of setting up Federal Reserve Capital LLC. FRC is a multi-strategy market leading diversified fund. FRC invests across all assets classes.
As our mortgage investments mature, we will use the cash proceeds to seed FRC. FRC will then go out and buy S&P 500 futures, wheat, etf’s, leaps, reit paper, speculative biotech stocks, BRIC assets, and anything else you can think of. The Fund’s mandate is to be long only-everything- anywhere on earth.
Oh, if you want to front run us, we will commence buying tomorrow as we already have secured a credit line from the FRBNY against upcoming maturities.
-Ben Bernanke, CIO