From Long Term Capital Management to Amaranth, dramatic collapses of large hedge funds have occurred throughout the history of hedge funds. In general, hedge fund blow ups result from a similar series of events and financial elements.
1. Improbable Market Events
First, there is normally an improbable market event that effects the specific central investment or trading strategy of the hedge fund. For example, the 1997 Asian Financial Crisis contributed to the failure of Long Term Capital as widening spreads caused relative value trades to fail. Hedge funds frequently engage in this type of relative …

Private equity firms have increasingly funded buyouts without using investment banks, but investment banks still add value to the private equity industry.

LIBOR stands for London interbank offered rate. Banks in London, similar to the United States, can exchange money between banks. LIBOR is the rate at which banks borrow funds from other banks in the London interbank market.
LIBOR Calculation
LIBOR is an average of actual rates used by banks. To calculate LIBOR, the British Banker’s Association (BBA), surveys a variety of banks that reflect the general market. The BBA then surveys the different bank’s interbank interest rate quotes. These quotes are made available to the public.
The top and bottom quartile of the …

As the popularity of hedge fund strategies increases, the influence of these strategies in the traditional mutual fund world continues to grow. Once limited to only high net worth accredited individuals or institutional investors, many hedge fund strategies are now be deployed within mutual funds.
130/30 funds are one of these new mutual fund structures. The 130/30 structure differs from traditional mutual funds because the strategy allows managers to have both long and short exposure.
Most mutual fund managers can only have long positions. In a long only portfolio, managers purchase stocks in …

Merger arbitrage, also known as risk arbitrage, is an event driven trading strategy that attempts to exploit the market price spreads of equities during mergers.

No, this post is not about the New York Yankees or Barry Bonds, despite the picture. This post is about a much more interesting topic, Yankee bonds.
Yankee bonds are dollar-denominated bonds issued in the United States by foreign corporations, banks, and governments.
Yankee bonds are registered with the SEC (Securities and Exchange Commission) and traded in the United States domestic market. Yankee bonds pay interest semi-annualy, and are rated by the the standard US rating agencies, S&P and Moody’s Investor Service.
Issuers of yankee bonds are mostly sovereign, or sovereign guaranteed issuers …