Hedge fund - The reason to the credit crisis?

[italkcash]

Back in 1933 the credit crisis that hit Wall Street was no near what some financial experts today consider can happen. The blame to take according to many people are the Hedge Funds. Back in February massive amount of oil were purchased in what seemed a scheme to inflate oil prices.

Hedge Funds around the world, offshore as well as non offshore Hedge Funds are playing a mayor role in the financial situation and are feared by governments as well as mayor banks. With a combined value of more than 4 trillion Euro's, Hedge Funds are having a great deal to say in the current financial crisis.

The current volatility may suit hedge funds better than traditional asset managers, advocates of the industry argue, because they can move more nimbly to adapt their strategies.

But as wild as it may seem, Hedge Funds are not a single core of administrative officials, but rather financial cowboys Hedging on anything that has a high return of investment.

[id62000]

Originally Posted by italkcash

Hedge Funds around the world, offshore as well as non offshore Hedge Funds are playing a mayor role in the financial situation and are feared by governments as well as mayor banks. With a combined value of more than 4 trillion Euro's, Hedge Funds are having a great deal to say in the current financial crisis.

Not surprising. Hedge funds worldwide manage a combined $1.3 trillion, more than double the amount they controlled five years ago (according to Hedge Fund Research Inc. in Chicago.) Returns last year (2007) averaged 13 percent, led by emerging-market funds, the best annual performance since 2003.

There have been many falls as well in 2007, resulting even in disappearances of some . Raptor Fund lost 9% in July; Sowood Management LP said July 30, 2007 that it lost $1.5 billion and Caxton Global Investments, an $11 billion fund, held on to a mere 3.5% gain for the year through July.

The losses by large funds add to the market volatility that has been caused by credit markets tightening due to subprime mortgages in default. Their losses add to the uncertainty, adding to the volatility of the market. The issue right now seems to be that too many hedge funds are not currently hedged.
Many of the losses in Hedge Funds were reckoned to be due to use of leverage.