Hard To Invest When Your Fund Is An ATM

Posted by Bull Bear Trader | 2/27/2009 08:24:00 AM | , , , , | 0 comments »

Jim Chanos, the famous short-seller who runs the hedge fund firm Kynikos Associates, was up 25 percent last year betting against equities. Nonetheless, he still found running a successful short fund challenging due to increased client withdraws (see Reuters article). Even with outstanding performance in a down market, investors still withdrew 20 percent of his funds assets. While some withdraws are normal, the percent was probably higher in part due to redemption gates put in place with other funds. After all, if you received margin calls, you have to get the funds from somewhere. As jokingly mentioned by Chanos, "we were like an ATM machine." Fortunately for Chanos and his investors, the Kynikos ATM was being replenished with cash. Given the current market, investors and depositors with some national and regional banks can only hope they are as fortunate.