NationStates Jolt Archive

So it seems that a couple hedge funds were going to short sell Volkswagon but did not know that Porsche had upped it's controlling interest.

Nice sting.

http://www.independent.co.uk/news/business/news/porsche-in-20bn-sting-976896.html

I am not sure about these hedge funds. I have not studied them but I have heard a few people talk about them being rather evil.

You're several days late. Because the funds had to buy no matter what the price to cover their shorting, VW exploded, and the exchange rose simply because VW is so hugely over-weighted in the index. So they're changing that.

The rest is basically business as usual. There is nothing wrong with hedge funds: they provide liquidity and they earn money doing it. The activist ones that take controlling interests also keep firm management on their toes and make sure CEOs don't get more than they deserve.

You're several days late. Because the funds had to buy no matter what the price to cover their shorting, VW exploded, and the exchange rose simply because VW is so hugely over-weighted in the index. So they're changing that.

The rest is basically business as usual. There is nothing wrong with hedge funds: they provide liquidity and they earn money doing it. The activist ones that take controlling interests also keep firm management on their toes and make sure CEOs don't get more than they deserve.

There's a lot wrong with hedge funds, mostly that they lack transparency and mislead investors, their fees are close to criminal and it's very hard to accurately judge whether they provide the returns they claim.

Beyond that, Warren Buffet has placed a quarter million bet with Protege that hedge funds won't beat the S&P index in the long run.

Hedge funds used to work because they went against the market - Warren Buffet himself started as a hedge fund - given an estimated 40% of market volume is hedge funds, they are the market.

In theory fine, in practice not so much.

You have to wonder what kind of idiot would go long POR short VOW. It's not like this was a secret or anything.

Still, well played POR. Hats off. /hatsoff

There's a lot wrong with hedge funds, mostly that they lack transparency and mislead investors, their fees are close to criminal and it's very hard to accurately judge whether they provide the returns they claim.

Beyond that, Warren Buffet has placed a quarter million bet with Protege that hedge funds won't beat the S&P index in the long run.

Hedge funds used to work because they went against the market - Warren Buffet himself started as a hedge fund - given an estimated 40% of market volume is hedge funds, they are the market.

In theory fine, in practice not so much.

You really can't complain about the fees. Only accredited Reg D investors are allowed to invest, so they should have enough sense to understand what they are getting into. Even if they don't, it's not the job of the government to protect the rich from themselves.

As to the transparency issue, if a hedge fund accumulates a position over a certain size, it has to report it to the SEC, just like everyone else. You might as well complain that Carl Ichann doesn't spend all day telling everyone what he is up to.

I guess two legit. criticisms are that pension funds, states, insurance reserves have lost a lot of money in them, and, that some of them are far too big. I have some sympathy with the first point, because I don't think those entities are institutionally right to deal with the risks. But the second is sort of self correcting, because once funds hit a certain size they can't be nimble enough and tend to blow themselves up. (Happened a lot recently).

I think people are all pissy with them right now because there has been a funds bubble over the past five/six years, which led to a lot of partnerships calling themselves hedge funds screwing a lot of people. But as I said, it's up to people to read the damn prospectus. The reality was that these things weren't actually hedge funds, but Reg. D. partnerships that specialized in specific - often deeply flawed - highly leveraged strategies. E.g. emerging market debt, or long commodities. (See red kite).

But the reality is that hedge funds actually are a most excellent thing. They are the best placed vehicles to operate in the high risk/return arena because they offer very little systemic risk. (Though not zero) and so they are exactly the type of place exotic stuff should go.

i thought both of them were just divisions of damler benz anyway?

i thought both of them were just divisions of damler benz anyway?
Huh?

Daimler - owns Mercedes, Smart, Maybach
BMW - owns BMW, Mini, Rolls Royce
VAG - owns VW, Audi, Lamborghini, SEAT, Skoda, Bentley et al
Porsche - (part-)owns VAG

i thought both of them were just divisions of daimler benz anyway?

Cam, mate! Which car-maker owns which other car-maker isn't the sort of thing people like us need to know!

You apparently got it wrong, but that's not the point. Why would you even care?

Cool. So now you don't even have to buy the VW-made Cayenne to have a Porsche - any Volkswagen will do.

Though Porsches have always been just sport versions of Volkswagen Beetle.

Profit without risk. Midas' gold.

Profit without risk. Midas' gold.

Whats this rubbish? Porsche had the risk the stock would go down, the hedge funds had the risk the stock would go up. Its not avoidable.

*Disclaimer*

"The value of shares may go up as well as down"

It's their own fault for short-selling.

Whats this rubbish?

You won't ever know, since you chose to ask so rudely.

Whats this rubbish? Porsche had the risk the stock would go down, the hedge funds had the risk the stock would go up. Its not avoidable.

Actually they didn't. They sort of set it up so they held all the cards.

Bloody brilliant. An absolute tops piece of action by POR, free market stuffs at its best, strong hands killing the weak sisters &c.

Though Porsches have always been just sport versions of Volkswagen Beetle.

That's a low threshold...by that criteria Vipers are just sporty K-cars...