Hedge funds

Hedge funds

Hedge funds, because then continue to grow in size and has attracted great attention in recent years. These funds have no loyalty to any country. Their scope of operations is also unthinkable. But this also makes them very risky. Long Term Capital Management (LTCM) made huge bets and profits in the mid-1990s before the collapse in the wake of a global currency crisis of the late 1990s. value at risk models, the company stated that it will take ten sigma event to cause the company to lose all the capital in one year. The likelihood of such an event is 1 in 1024 or effectively zero. But suddenly, all markets where there was exposure to LTCM began to move in synch. Correlations increased dramatically. When losses began to mount, many participants simply withdrew from the market, leaving LTCM with a portfolio of illiquid assets can not sell at any price.

Together with hedge funds, sovereign wealth funds (SWFs) also began to play a major role in the international monetary system. By the end of 2007, these assets was about 2.6 trillion U.S. dollars under management. In the first round of recapitalization of a large part of global banks, the SWFs have played a major role.