Several hedge funds with assets of more than $4 billion (£2 billion) were on the brink of collapse last night or had halted withdrawals, despite moves by the US Federal Reserve this week to ease America's deteriorating credit crisis with a $200 billion collateral lending facility.
The potential closure of six funds came as a leading private equity executive, who declined to be named, said that such funds were "snapping like twigs", with one failing every day.
Yesterday Patti Cook, Freddie Mac's chief business officer, predicted that the Federal Reserve's $200 billion bond lending facility this week would fail to solve the long-term problem of Wall Street's deepening credit crisis.
FINTAG SAYS: As a true capitalist I see these events as positive. The strong survive and the weak fall. Unlike Ben "Socialist" Bernanke who believes you can smooth out market corrections, it is often better to squeeze a pimple than cover it with foundation.
MARCF SAYS: Well, ok... so these funds total 4B, there are 400B out there, surely this will save more than a couple of funds. The little fact that few people mention is that the facility doesn't go online until March 27, a small but important fact. In the meantime the banks continue their bully dance "hands up, hand em over".
All hedge fund strategy groups ended the month with gains, Greenwich said.
'February's rebound in the midst of market uncertainty continues to highlight the diversification benefits of hedge funds,' Margaret Gilbert, managing director at Greenwich said.
Its not all gloom and doom. The winners are hedge funds.
MARCF SAYS:... hmmmm really this is no pimple, this is the liquidity going down and some funds are going to be left HIGH AND DRY, mathematically, when the fed inject liquidity (temporarily) it will float some guys back up but not all. Deleverage means THERE IS LESS MONEY and MATHEMATICALLY some of the fringe guys are going to dry up. It is normal that hedgies would do ok in turbulent times, as the best of them, are not leveraged speculators but really ***hedged*** positions with insurances against those movements. The strategies may be fine, the leverage isn't. And then what would expect as official communication out of an interested party. "We aren't dying as fast as people think!" says head of real-estate agency.