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andrew lahde, Hedge fund of andrew lahde returns money
The best performing andrew lahde 's Hedge fund manager of the past two years
has closed down his funds and is returning money to investors after concluding
that the danger of losing money from a bank collapse is too high.
Andrew Lahde, founder of California’s Lahde Capital, told investors last week
that further credit problems – the basis of his profits – were likely but the
reliance of the bet on bank counterparties made it too risky.
The move by andrew lahde, who returned 870 per cent last year in one fund
betting against subprime mortgages, and was at one point up more than 1,000
per cent, underscores the threat that is posed to hedge funds by bank failures.
andrew lahde 's concerns are shared by many users of the over-the-counter
credit derivatives market, which last week came under intense scrutiny
from investors and regulators because of secrecy and reliance on counterparties.
In a letter to investors, andrew lahde wrote: “While we concede there are
additional op portunities in this episode of crisis and uncertainty,
we have concluded that those op portunities are far outweighed by the risks
attendant in the use of the over-the-counter derivatives market.”
andrew lahde 's funds were small but high-performing after his bets on a
financial meltdown proved correct.
In March andrew lahde closed a six-month-old fund dedicated to bet ting
on falls in the value of credit linked to commercial property, after it
return ed more than 200 per cent. The Short Credit fund being closed was
set up in De cember to bet mainly against the credit quality of banks and
broker/dealers, with some broader bets against corporate credit indices,
using credit default swaps.
One investor said it was up about 40 per cent this year at the end of August,
depending on the share class, although exact numbers had not yet been calculated.
andrew lahde said it would be up “double digits – missed the triple or quadruple
digits with this one”.
The risk of bank failures for andrew lahde 's Hedge fund, whose assets are often
held in the prime brokerage arms of big banks, and for traders of credit default
swaps (CDS) suddenly became a big issue last week when Lehman Brothers filed
for bankruptcy. andrew lahde said his fund lost about 2 per cent from the collapse
as trades due to settle last Monday had not gone through.
Lehman’s failure resulted in a dash by andrew lahde 's Hedge fund to move prime
brokerage away from Morgan Stanley, the biggest prime broker and one of only
two remaining large US broker/dealers, and to a lesser extent from rival Goldman Sachs.
CDS traders also rushed to shift trades away from banks seen as risky and towards
big commercial banks regarded as less likely to fail.
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