Hedge Fund Selling Puts New Stress On Market

Hedge funds are selling billions of dollars of securities to meet demands for cash from their investors and their lenders, contributing to the stock market's nearly 10% drop over the past two days.

The Dow Jones Industrial Average fell 443.48 points on Thursday, bringing its two-day drop to 929.49 points, its biggest two-day decline since Oct. 20, 1987. Coming amid steep drops in the retail and auto sectors, the decline wiped out a strong rally that ended on Election Day, and now the market is only 6% away from its lowest close of the year.

One of the biggest hedge funds, $16 billion Citadel Investment Group, is being asked by several major banks to post additional collateral to cover big losses on its investments, according to people familiar with the situation.

Citadel, which is run by Kenneth Griffin, was until recently considered a possible savior for troubled Wall Street firms. But his biggest hedge fund has fallen nearly 40% this year, prompting the firm to hold conversations with lenders including Goldman Sachs Group Inc., Deutsche Bank AG and Merrill Lynch & Co. that finance Citadel's trades.

Citadel executives say the calls for more cash are a normal part of business when securities they hold fall in value, and they emphasize they have significant amounts of cash to satisfy their lenders. They say they have met all the demands for collateral. Rumors that the firm was having problems led it to hold a conference call two weeks ago in which it said it was holding 30% of its capital in cash and Treasurys and had $8 billion in credit lines it has yet to tap. The firm also said some of its businesses are doing well this year, that it has reduced risk and its use of borrowed money, and that performance has improved recently.

Lenders are hoping regulators would orchestrate a settlement among the companies involved in Citadel's loans if necessary, according to a person familiar with the situation. 'Citadel is a valued client, and we continue to do business with them as usual,' said Ed Canaday, a Goldman spokesman.

Deutsche Bank spokesman Ted Meyer said, 'Citadel is a valued customer and our relationship is business as usual.'

Hedge funds have emerged as the latest serious problem in the global financial system. As their losses mount, they're selling off securities to meet demands for cash from lenders and investors. Compounding the problem is a surge in notices from investors indicating they want out. Some hedge funds have been hoarding cash in preparation for these withdrawal requests. Hedge funds are sitting on a record amount of cash, estimated at about $400 billion, money that eventually could make its way into the market. Other managers are hoping that investors have second thoughts and don't go through with the withdrawals, or are telling their investors that they will sell securities over time rather than dump them as the market falls. But either way, the wave of requests is keeping money out of the market as hedge funds figure out their next moves.

Withdrawals from hedge funds and from mutual funds are one factor weighing on stocks, says Mary Ann Bartels, Merrill Lynch's chief strategist. 'It's an overhang for the market,' she says.

The recent rush of withdrawal notices to hedge funds comes as investors, including endowments, pension funds and wealthy individuals, see other investments shrink; in some cases these investors need cash to meet their own obligations. It also marks a sharp reversal of sentiment among these big institutional investors, which jumped into hedge funds and similar investments in recent years.

The result is a downward spiral where hedge funds sell off thinly traded securities such as convertible bonds and corporate loans, driving down their prices, and leading to bigger losses and more demands for cash. Some $4.28 billion worth of corporate loans have been put up for sale in the past month, according to Standard & Poor's. When hedge funds can't meet the demands for cash, lenders seize their assets and try to sell them, further driving down prices and putting more funds in trouble.

Even the most established hedge funds are being hit by -- or girding for -- withdrawals from investors.

Carl Icahn, the billionaire activist, has received $1 billion of redemption notices from investors in his $7 billion hedge fund after posting losses that are a bit lower than the overall market this year. He's putting $250 million into the fund to help avoid selling shares to meet the requests.

'In mid-October, redemption levels were in the 5% range but all of a sudden now it's cranking up to as high as 25% for some funds,' says Gregory Horn, president of Persimmon Capital Management, a $500 million Blue Bell, Pa., firm that invests in hedge funds. The firm has asked for about 20% of its total investments back. This 'is the highest level of redemption requests' for the industry in at least 17 years, Mr. Horn says.

Some investors are withdrawing because they're more wary of hedge funds, which fell 20% this year, through October. That beats the 34% drop for the Standard & Poor's 500 but is nonetheless disappointing for an industry that has returned 13.8% annualized since 1990, above the 10.5% return of the S&P 500. San Francisco hedge-fund firm Farallon Capital Management LLC, which oversees about $27 billion, has seen its biggest hedge funds fall between 23% and 29% on investment declines this year, according to investors.

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对投资者和债权人的大量现金需求，对冲基金正在抛售数十亿美元的证券，这股潮流推动股市在过去两个交易日下跌近10%。

周四，道琼斯工业股票平均价格指数下跌443.48点，周三、周四两日合计下跌929.49点，这是其自1987年10月20日以来最大的两日跌幅。其间，零售和汽车类股大幅走低。这次大跌抵消了截至选举日的一波上涨行情，目前，大盘较年内最低收盘点位只高出6%。

据知情人士说，规模最大的对冲基金之一Citadel Investment Group（拥有资产160亿美元）已接到多家大银行提出的增加投资抵押品以弥补损失的要求。



Phil McCarten /Landov

Citadel掌门人格里芬(Kenneth Griffin)



由格里芬(Kenneth Griffin)执掌的Citadel之前一直被认为有可能成为华尔街问题公司的拯救者。但他旗下最大的基金今年已跌去近40%，为此，该公司与包括高盛(Goldman Sachs)、德意志银行(Deutsche Bank AG)和美林(Merrill Lynch & Co.)在内的为其交易提供融资的机构进行接洽。

Citadel管理人士说，当投资者所持证券价格下滑时，提出更多现金需求是很正常的事，并且强调说，他们有大量现金满足债权人的全部需求。他们说，已满足全部抵押品需求。有关该公司遇到麻烦的传言迫使它两周前举行了新闻发布会，并在会上表示，目前手头以现金和国债形式持有30%的资本，且还有80亿美元尚未动用的信贷额度。该公司还说，它的部分业务今年表现不错，它已降低了风险敞口和贷款使用额，近期业务表现也有所改善。

据知情人士说，债权人希望在必要的时候监管机构能在Citadel贷款涉及的公司中间做个协调。高盛发言人堪纳德(Ed Canaday)说，Citadel是一家很有价值的客户，我们跟它继续有业务往来。

德意志银行发言人梅耶(Ted Meyer)说，Citadel是优质客户，我们的业务关系跟平常一样。

对冲基金是全球金融系统中最新显现的问题领域。随着亏损上升，他们纷纷抛售债券以满足放贷机构和投资者对现金的需求。投资者希望卖出所持投资的通知大量增加，导致问题进一步加剧。一些对冲基金一直在囤积现金以备这类赎回需求。对冲基金现在手中持有的现金估计达到了创纪录的4,000亿美元，这些资金最终可能会流入市场。其他基金经理现在希望投资者能三思而行、不要进行赎回，或是跟投资者说，他们会过一段时间再出售证券，而不会在市场下跌的时候仓促抛售。但不论哪种情况，在对冲基金考虑下一步行动的时候，大量的赎回要求正在导致资金持续流出市场。

美林首席策略师玛丽·安·巴特尔斯(Mary Ann Bartels)说，对冲基金和共同基金遭遇赎回是令股票价格承压的一个因素，对股市形成威胁。

对冲基金最近遭大量赎回是因为捐赠基金、退休基金和有钱的散户等各类投资者眼见其他投资缩水；有时这些投资者需要现金以偿付自身的债务。这种情况还标志着近年争相投资对冲基金和类似投资产品的大规模机构投资者的观点发生转变。

其结果是形成一个恶性循环，对冲基金会抛售可转换债券等交易量很低的债券以及企业贷款，推低这些投资的价格，导致更大的亏损和更多的现金需求。据标准普尔(Standard & Poor's)统计，过去一个月约有42.8亿美元的企业贷款待售。当对冲基金无法满足现金需求时，贷款机构会扣押它们的资产，并试图将其出售，这又导致价格进一步下滑，令更多的基金陷入困境。

就连实力最雄厚的对冲基金也正遭到－－或是即将遭受－－投资者赎回的打击。

亿万富翁卡尔·伊坎(Carl Icahn)规模70亿美元的对冲基金宣布亏损，幅度略低于今年整体市场的亏损，此后基金投资者要求赎回的资金规模已达到10亿美元。他正向该基金注资2.50亿美元，以避免为满足赎回要求而抛售股票。

规模5亿美元、投资对冲基金的Persimmon Capital Management公司总裁霍恩(Gregory Horn)说，10月中旬的赎回率为5%左右，但现在一些基金的赎回率突然一下子飙升到了最高25%。该公司已经赎回了总投资额的20%左右。霍恩说，这是这一行业至少17年来最高的赎回水平。

一些投资者要求赎回是因为他们对对冲基金更加警惕，对冲基金今年截止10月下跌了20%。这一跌幅不及标普500指数下跌34%的幅度惨重，但还是令人失望，基金行业1990年以来年均收益13.8%，高于标普500指数的10.5%。据投资者提供的数据，管理着约270亿美元资金的旧金山对冲基金公司Farallon Capital Management LLC旗下规模最大的一些对冲基金今年下滑幅度在23%-29%之间。