Image source: Famous-Entrepreneurs
Hedge Funds have had a rough few years to say the least, with major players like Melvin Capital even shutting down after the major AMC & GME stock short squeeze early last year.
The FTX situation which has been putting stress on many involved has spilled over into the hedge fund front and now multiple funds are stuck in limbo with billions of dollars potentially stuck or gone forever. FTX the company that was valued at over $30 billion this year showed in legal filings that a large group of hedge funds and other asset managers are wrapped up in this mess in the tune of billions of dollars.
Hedge funds have already experienced massive outflows this year, according to (Reuters) – “Investors pulled an estimated $26 billion from hedge funds during the third quarter, according to data provider HFR, jarred by a global stock market plunge, soaring bond yields and geopolitical tensions. “
Could this FTX situation put large asset managers and hedge funds in a similar position that we saw during 2008 with the Lehman Brothers black swan event. The Lehman Brothers situation was of course different in terms of sector but the same as far as how it stressed the system.
According to Investopedia “Lehman Brothers was a global financial firm that provided investment banking, trading, brokerage, and other services. It was the fourth-largest investment bank in the United States. The firm declared bankruptcy on Sept. 15, 2008, because of the subprime mortgage market.”