Most Investors Will Miss This Chance

April 2, 2008 |

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The Financial Times recently ran a story titled “‘Unbelievable’ chance for hedge funds” and opened with:

“Hedge funds and institutional investors are starting to launch distressed mortgage funds to take advantage of an “unbelievable” buying opportunity, but they say they are running into resistance from risk-averse prime brokers”.

From where I’m sitting, the prime brokers are only a fraction of the problem.  The real road block is underlying investors.  The investing world has once again thrown on the blinders and after selling all of their positions into an illiquid market will sit on cash until it is too late, or worse, they are chasing liquidity down another rabbit hole - commodities. The supposed “long-term” investor has once again shown their true colors at the first sign of trouble and continues to lend support to the “hot money” moniker so feared by all serious hedge fund managers. 

My advice to the managers: keep the lock ups coming; it’s the only way to effectively manage your business and keep the little leaguers from fowling up the works.

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