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Posted: 19 May 2011 07:19 PM PDT

Hedge Funds Leverage

Report Shows Hedge Funds Are Using Less Leverage

Hedge funds have been employing less leverage over the last twelve months. According to a recent report, the average standard leverage for all hedge fund strategies fell from 1.27 to 1.10 times investment capital and average margin to equity also fell from 17.13% to 16.98% year on year.

HFR says average standard leverage decreased across all hedge fund strategies from 1.27 to 1.10 times investment capital, while average margin to equity also declined, falling from 17.13% to 16.98% year on year. Moreover, approximately one-third of all funds used no leverage—an increase of 4% over 2010, while over half of all funds use leverage of between one and two times their investment capital.

Larger funds tend to employ more leverage, thus HFR's report shows 23% of funds with AUM over $1 billion use leverage of between two and five times their investment capital.

The study also points out that although funds employing leverage usually experience greater volatility, the difference in performance between leveraged and non-leveraged funds since 2005 is not statistically significant. Source

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SAC Capital Quantitative Fund

Posted: 19 May 2011 07:02 PM PDT

SAC Capital Quantitative Fund

SAC Capital to Launch Quantitative Hedge Fund This Year

SAC Capital Advisors is expected to launch a quantitative hedge fund this year at the behest of current SAC investors. The hedge fund will be managed by twenty teams of SAC Capital's quantitative traders.

SAC Capital Advisors plans to launch a new quantitative hedge fund later this year after seeing assets climb by more than $1 billion in recent quarters, Bloomberg News reported Thursday, citing two unidentified people familiar with the decision.

The hedge fund will be managed by 20 teams of so-called quant traders at SAC, Bloomberg said. These types of funds use computer models to spot trends and anomalies in securities markets.

Current SAC investors asked the firm to open the fund. It's expected to launch in the third quarter, Bloomberg added, while noting quant investing makes up about 15% of the roughly $35 billion, including leverage, that the firm manages.

SAC was subpoenaed by the government last year as part of a broad investigation into potential insider trading in the $2 trillion hedge-fund industry. Two former traders from the firm have pleaded guilty to charges stemming from the investigation. Source

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