Well it was a good 2.2 year run? Gosh I cannot even raise $15 million and geniuses like this who can lose all their investors money can raise a billion+. Must be nice... I really need to go get a Goldman pedigree - anyone trusts you when you have that I supose.
- Peloton Partners, the hedge fund founded in 2006 by Ron Beller, a former Goldman Sachs partner, has told investors it is being forced to liquidate a $2 billion fund of asset-backed securities.
- Beginning the liquidation process for the Peloton ABS Fund represents a massively life-threatening situation for the company, which last year was one of London's best-performing funds.
- Run by Mr Beller and Geoff Grant, another ex Goldman Sachs partner, Peloton posted an 87 per cent return last year in large part thanks to the success of its bets against sub-prime.
- But the continued deterioration of the credit markets appears to have gone against the fund in recent weeks. Mr Beller and Mr Grant said they were "working night and day" to secure the future of the fund. The two managers said they had been forced to actively seek a buyer.
- Speculation mounted that Citadel and GLG Partners, two rival hedge funds, were among several parties to have declared interest. (who else but Citadel which is EVERYWHERE)
- When the market stalled in recent weeks, the ABS fund, backed by a ratio of four-to-five times leverage, chose an "orderly liquidation" to pay off lenders, one source familiar with the fund's recent activities said. (oops)
- Peloton also wrote to investors today to tell them it was suspending dealings in the Peloton Multi-Strategy Fund and would no longer try to calculate net asset values.
Leverage works great on the way up, when your 15% return turns into 75% when you borrow 5:1 or 10:1. On the way down? Not so much. Folks this is no different than your margin calls on your online brokerage accounts - but instead of borrowing 1.5:1 like you can - they borrow much much much more. Because they're smarter than you. After all they worked at Goldman. But don't you worry - send them another billion and they promise they won't make the same mistake twice. Scout's honor!
Somehow I don't think this will be the last. I am sure Citadel has billions sitting around waiting for hedge fund after hedge fund (full of very sharp managers with great MBA degrees, who will promise this won't ever happen again) to implode this year. :) Citadel always wins in the end.
