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October 16, 2008

Why are commodity prices low in the face of unparalleled government fiscal and monetary intervention?

Price Value

"Hedge funds in grip of vicious selling cycle

Troubles mounted for some of the world’s biggest hedge funds on Thursday as Highland Capital Management told investors it was shutting down two of its funds and details emerged of big losses at TPG-Axon.

The problems in the sector have set in motion a vicious cycle in the markets as hedge funds sell holdings to return money to worried investors, triggering further price declines and prompting more withdrawals. Investors pulled at least $43bn from hedge funds in September, according to TrimTabs Investment Research.

'Unfortunately, selling has begat selling as risk reduction and unwinding create spillover pressure on other funds with overlapping holdings,' Dinakar Singh, the founder of TPG-Axon said in a letter to investors at the end of September.

TPG-Axon – an affiliate of private equity firm TPG that had $16bn under management at its peak – told investors it was down 26 per cent through September of this year.

'The last quarter has been abysmal,' Mr Singh said. 'We clearly underestimated the potential damage to us from chaotic moves elsewhere.'

Ken Griffin, founder of Citadel Investment Group, told investors in a letter that September was the worst month in its history and to expect more volatility."

*This information is solely an excerpt of a third-party publication and is incomplete. Please subscribe to the referenced publication for the full article. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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