Unit Trust and Hedge Funds

Do you trust them? How to find another George Soros or Warren Buffett?

More than 90% of Unit Trust lose money with many losing more than 50% of the funds, giving all type of shit for their failure and yet being paid annual management fees for their lousy performance. Many think Unit Trust are safer than stocks because they are diversified and managed professionally. Why entrust them with your funds when many of the fund managers are no better than you and I.

Investors have been advised to stay invested for the long term, so, how long? 10 years or 20 years? Some don't even see daylight after 10 years. Investors are down a few percent the moment they buy into Unit Trust because of the sales charge and the wide spread.

Hedge Funds are highly unregulated funds that live by their wits to take highly risky bet on stock, commodities, options, debt products and derivatives (futures) for their rich investors. Since it is Others People Money (OPM), most lack moral decency. Little is known about how they operate and the type of systemic risks they may generate and what kind of risk they pose to the financial system as a whole.

They take on complex hedging positions and move market with their size taking huge performance bonuses when they are right on their bet. They borrow heavily from banks averaging 1:30 to take such risky bet. These funds claim to deliver absolute returns in both rising and falling markets.

Experts are predicting the death of more than 1,100 funds this year due to the financial turmoil, so they just close shop with investors the major loser. These Hedge Funds Managers will just set up another new outfit and start all over again later. Who are the suckers?

I believe Hedge Funds are one of the major contributor to the recent financial turmoil resulting in the collapse of Lehman Brothers. Most Hedge Fund managers are reckless and greedy. Their combined gearing would move any market, they are the biggest bully and gambler.

In recent months, many had gone "long" on oil - snapping up oil futures - and "short" on banks - selling global bank shares aggressively. How could oil moved up to almost USD150/- per barrel in just a year or two from USD50/- without these sophisticated speculators? They pushed gold, silver, palm oil, wheat, rice, etc to new highs creating havoc world wide causing great misery to the ordinary folks with running inflation.

With oil price and commodities prices dropping like a stone, many of these cowboy hedgies will go belly up. The Long-Term Capital Management (LTCM) collapsed in 1998 sparkled a liquidity crises, but the US government bailed them out. With the collapse of so many hedge funds now, how to bail all of them out?

The deepening economic gloom had casused a massive sell-off in equities and commodities by imploding hedge funds whose large scale trading strategies had gone awry.

With record redemption by disgruntled and panicky investors, it has triggered a vicious circle in Asian equities markets where they had parked some of their spare cash in the hope of getting high returns. As they sell shares to raise funds, they depress prices further and prompt more redemption pressure from investors.