Word: withdrawals
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...returns ("But clearly I play better, no?" "I've won on grass before, no?"). At the BNP Paribas Masters in November, he insisted that what really needed changing was the length of the professional tennis season, not his game. (Two days later, tendinitis in his knee forced him to withdraw from the event.) "The Tour is very tough because the season is too long in my opinion," he told TIME as he melted four squares of butter into a steaming heap of plain pasta. (A portion of salmon waited to one side). "Next year is going to be very difficult...
...Obama chooses to remain silent, France's Nicolas Sarkozy is offering himself for the role. That alone means Israel won't have everything its way. The international outcry over the humanitarian tragedy unfolding in Gaza means the broker will insist that Israel loosen the economic shackles as well as withdraw troops. And when the money begins to flow in, it will flow through the Hamas networks that control every aspect of Gaza. The militants will distribute some of the money to Gazans, looking like generous benefactors; the rest they will use to rebuild their military capability...
Suppose some investors decide to withdraw their money from a hedge fund. The fund must liquidate the appropriate amount of its assets to pay these investors. Say the fund holds large positions in illiquid assets. The fund cannot immediately sell these assets, except at a fatal loss, so it would sell its more liquid assets. Given that the fund is more likely to inflate its estimation of the illiquid assets, it would seem that investors who withdraw early get the better returns over that time period. Sounds a bit like a Ponzi scheme, right...
...regularly liquidate assets, we would not see the spectacular returns reported in the past. One factor of the supposed success of hedge funds is their ability to report unrealized gains and to be flexible in liquidation, since investors who believe they are getting high returns are unlikely to withdraw their money. That was how Madoff was able to maintain his charade for so long...
Wonder why Chicago-based hedge fund Citadel is not allowing investors to withdraw their money until at least March? Citadel has already reported about 50% losses for its two largest funds. Remember: these are unrealized losses. If Citadel liquidated assets to pay out to investors, losses would be even greater. Barring a miracle, the first investors out would lose less than those going out later. But even in good times, the withdrawal of money from a hedge fund impinges its performance...