Hedge Fund Focus

9-18-06 Charles Gradante on CNBC’s Closing Bell with Maria Bartiromo

This interview came after Steven A. Cohen of SAC Capital made comment to the Wall Street Journal regard big hedge fund returns.  According to the video Mr. Cohen stated that the time of big returns to hedge funds were over - that everything has been picked over.

The video is a round-table-like discussion about his comments and the strength of the hedge fund industry.  The discussion veered into the question of the systemic risks that hedge funds pose in a post Long Term Capital Management world.  The commentators generally believed that hedge funds do not pose great systemic risk to the capital markets, noting that the markets were able to weather the Amaranth downturn.

It was very interesting to watch this video knowing everything that has transpired over the last couple of years.  One commentator was especially prosaic saying that there was systemic risk with regard to the CDS markets.  Another interesting observation was that there was a lot of correlation risk between the large hedge funds.  This brings us back to the issue with regard to SAC - SAC is essentially a day trading shop which has grown into a huge ($8 billion plus) hedge fund.  It is hard for a firm that big to maintain returns as more groups crowd into the same investments.