Former Lehman Traders Look to CRE

Chidem Kurdas

Could it be that commercial real estate presents

Margin Focus in OTC Default Risk

Chidem Kurdas

When Lehman Brothers collapsed in 2008, LCH.Clearnet took over huge derivatives  positions from the bankrupt bank. The clearing house successfully managed this and four other defaults, says Isabella Kurek-Smith, director and head of energy and freight markets at LCH.Clearnet. The experience demonstrated how important it is to require adequate initial margin—though some derivatives traders complain

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Lehman Brothers’ Short Selling Lesson

Chidem Kurdas

Share prices are now high by certain standards. Some are ripe for shorting, at least in theory. But in practice short trades are almost guaranteed to lose money in a rocketing market.  Short-biased hedge funds lost money in the past 12 months and short selling fell in December as stocks climbed.  

Lehman Veterans Ride Credit Cycle

Chidem Kurdas

Long/short credit funds were the top performers year-to-date as of July, returning about 7% according to Greenwich. That’s pretty good, considering that the Greenwich Global Hedge Fund Index is up only 1.3% while major equity markets are in the red.

In large part this a classic story of bottom feeding. Snap up paper that got labeled “toxic” in the crisis and became absurdly cheap. Then wait till prices start moving back to reasonable levels—which did not take as long as one might have expected from the severity of the crisis.

A credit fund that’s found favor with certain large investors is One William Street Capital Partners, started by David Sherr, who headed Lehman Brothers’ securitization business but left more than a year before the bank’s collapse in 2008. 

Goldman Replicator: Mixed but Promising Results

Chidem Kurdas

Goldman Sachs runs a hedge fund tracking strategy that buys and sells instruments like futures contracts according to a benchmark. Replicating hedge fund returns has been a topic of interest to investors for several years.

So how does the Goldman tracker compare to actual hedge funds? There’s some bad news. In 2009, Class A shares in the Goldman tracker fund returned 5.75%. That’s substantially lower than returns for hedge funds as a group.