Tale of Two Hedge Funds: Magnetar and Peloton Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

The hedge fund Magnetar Capital returned 25 percent in 2007, the strategy delivered a significantly lower risk for investors than the S & P 500. Magnetar made more than $ 1 billion in profits, noting that equity tranche of debt and CDO-derivative financial instruments are relatively undervalued. He took advantage of this anomaly when buying CDO equity and buying credit default swaps (CDS) to protect the trenches, which are considered less risky. Now it was the work of Alec Litowitz, chairman and chief investment officer, to give instructions to his team as they planned strategy for the next year, evaluate and prioritize their ideas and generate new ideas of their own. Ocean, Ron Beller considered several very different issues. Beller firm, Peloton Partners LLP, was one of the most effective hedge funds in 2007, returning more than 80 percent. In late January 2008 Bellaire adopted two prestigious awards at a black tie ceremony EuroHedge. A month later, his company went bankrupt. Bellaire closed the U.S. housing market before the mortgage crisis hit and was handsomely paid his bet. Once the crisis hit, however, he believes that prices appreciated mortgage securities have been unfairly punished, so he decided to go a long AAA rated securities backed by Alt-A mortgage loans (between prime and subprime), borrowed 9x. Trade opposed the Peloton in a big way on February 14, 2008, causing $ 17 billion in losses and the closure of the firm. "Hide
by David P. Stowell, Stephen Carlson Source: Kellogg School Management 23 pages. Publication Date: June 1, 2009. Prod. #: KEL402-PDF-ENG