Commentary on the economy, the markets, and business

An opportunity to invest in cash and pay 2 and 20

Bloomberg has a story this morning about how some high-profile hedge fund managers—Steven Cohen, David Einhorn, Paul Singer—are opening up their funds to new investors for the first time in years. Seems they're having luck raising money, even as many of their peers are being forced to dump positions to meet redemptions.

As for what you get in return—well, that's the thing. As the Journal recently reported, a number of hedgies have moved to large cash positions after deciding to sit this market out. (A lot more have moved to cash because investors want their money back, but that's a different story.)

One of the prime examples in the Journal's piece: Steven Cohen. He's reportedly moved about half of the $14 billion in SAC Capital Advisors into money-market and other short-term securities, and plans to keep it that way for the rest of the year. Investing in cash under a hedge-fund fee structure. And here we thought they'd already thought of everything.

Barbara!

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  1. hmmm... once private hedge funds opening themselves up? I think the phrase for this is "ponzi scheme".... they may have 1.4 billion cash, but what are their liabilities?

  2. If the model for investment banks is broken, so should be the model for hedge funds. Presumably, the 20 part will not be a drain on investors.

  3. What idiot would pay somebody else to buy money markets and 3 month CDs?? That is just dumb.
    .
    Almost as dumb as Greenspan thinking that lax fiscal and regulatory policy can foster growth. Can you say putzes? I can.
    .
    I'll invest folks money into money markets for .1% and you would never have to pay the wall street idiots.

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