Subprime is apparently a two-part saga according to the performance of former Long-Term Capital Management partner John Meriwether.
"It isn’t quite déjà vu, but a hedge fund run by Long-Term Capital Management founder John Meriwether isn’t weathering the credit crisis well.
Meriwether’s Relative Value Fund is down 9.19% in the first two months of the year, his firm, Greenwich, Conn.-based JWM Partners, has told investors. The performance is the $1.2 billion fund’s worst since its 1999 launch.
In a note to investors in January, about one-third of the fund’s 4.14% decline that month was attributed to “an extreme spread widening in AAA commercial mortgage-backed securities,” Reuters reports."
via FinAlternatives.
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2 comments:
Hindsight is obviously 20-20. As many fixed-income arbitrageurs will tell you, John Meriwether included, if you wait long enough anticipated relationships, if soundly founded, will converge. Meriwether and many other famous arbitrageurs are simply victims of solvency issues rather than a misunderstanding of market trends. I find your quote to be extremely anecdotal, though he may again fall victim to solvency problems. Out of curiosity, do you know what his relative value MBS plays were?
I really hope ALL fixed-income arbitrageurs would tell you that, not just "many."
Unfortunately, unless someone here is tight with John, I don't think we'll know his plays for quite a while. However, one article did say some of the losses resulted from CMBS's.
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