Battlebots

Hedge Fund Unwinding Is Still Driving This Train

It is market-wide, but hedge funds are providing most kindling for the de-leverage bonfire. Unlike traditional asset managers, HFs are...
(1) leveraged ($2T industry x 4(ish) leverage)
(2) account for 25-50% daily trading volumes
(3) unable to anticipate redemptions as well as traditional mgrs...forcing rapid HF de-leverage to avoid redemption fire-sales.
(4) more exposed to OTC events (such as LEH CDS settlement today) and prime brokerage shocks, providing more rationale to de-leverage.

Yes, leverage is coming down and HFs sitting on more cash, but there's a reasonable chance that this bonfire continues to burn for awhile.