tag:blogger.com,1999:blog-5389144729834496735.post4098251509007956213..comments2024-03-17T05:15:55.634-04:00Comments on The Brooklyn Investor: GLRE: David Einhorn at BookUnknownnoreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5389144729834496735.post-11030414673494214752012-05-17T15:18:22.948-04:002012-05-17T15:18:22.948-04:00Yes, but that restricted cash is mostly proceeds f...Yes, but that restricted cash is mostly proceeds from the short sale. This is the way it is accounted for. There isn't need to gross up the investment for that (no new cash is posted as collateral for a short sale; and short sales are supported by assets held in prime brokerage accounts). <br /><br />Having said that, there may be some restricted cash they may have to be accounted for as part of investments. But that wouldn't be the case for proceeds from short sales for the reason I stated above. <br /><br />This is similar to the concept of gross leverage and net leverage at investment banks; net leverage eliminates low or no-risk repos on the books as it increases securities borrowed on the liability side and cash (collateral) on the asset side but have low risk due to short term nature and underlying typically being treasuries. They net out and are pretty much non-events balance sheet-wise...kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-53600580614725478572012-05-17T14:54:19.921-04:002012-05-17T14:54:19.921-04:00The short book is offset by restricted cash, not i...The short book is offset by restricted cash, not investments.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-56052007745047094832012-05-17T13:54:25.647-04:002012-05-17T13:54:25.647-04:00Hmmm... Interesting. If you gross up the short bo...Hmmm... Interesting. If you gross up the short book, you will drastically overstate 'exposure' I think, as the short book offets the long book and a portfolio of longs stocks and short stocks will tend to offset each other (of course not perfectly). <br /><br />A long/short hedge fund will typically have a lower volatility than a naked long only equity portfolio. <br /><br />So generally, a $100 NAV value in a hedge fund will act like $100 equity fund but with lower volatility. If the fund was $120 long and $80 short for an $40 net long position, the vola will be much lower than an equity mutual fund of $100. If you gross up the longs and shorts, you will see $200 in 'investments', but that far overstates reality.kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-3585214605385240952012-05-17T13:36:34.044-04:002012-05-17T13:36:34.044-04:00IMO, you have to account for the short book too wh...IMO, you have to account for the short book too when looking at total investmentsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-71209423870479216622012-05-17T07:16:52.438-04:002012-05-17T07:16:52.438-04:00Thanks for the idea.Thanks for the idea.kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-3306807376642406412012-05-17T03:52:15.718-04:002012-05-17T03:52:15.718-04:00Here's another idea if you want hedge fund exp...Here's another idea if you want hedge fund exposure. TPOU which trades in London is at about a 15% discount to NAV. This is Dan Loeb's hedge fund. Instead of paying in effect 3.5% fees (2% for insurance losses + 1.5% management fees) at premium to book, with TPOU, you pay only the mgmt fees and get in at a deep discount to book. Dan himself invested $25m in this vehicleKiseinoreply@blogger.com