May 24, 2006

Small hedge fund players might be in trouble...

There's lot of speculation going around. It began with Man Group, the world's largest quoted hedge fund manager revealing that some of its futures fund made substantial losses this month. This has sparked the fear that smaller hedge funds might be suffering even greater losses.

The volatility in the equity markets seem to be finally taking its toll. Many hedge funds are also likely to be hit by the recent strengthening of the dollar even as the commodity prices tumbled.

Why should we be concerned of a failing hedge fund? Because it is one sure shot recipe of creating panic in the market. As the hedge fund will be forced to sell stock into an already falling market which will further pull it down. But then nobody has much of a choice, since if they don't do it, they would end up breaching their financial obligations.

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