Margin of error

Lawsuits are surfacing in the US between hedge funds and prime brokerages over disputed margin calls on structured credit trades. Prime brokers have traditionally been the judge, jury and executioner in margin disputes - but this looks set to change. Peter Madigan reports


Hedge funds have had a torrid time over the past 12 months. After the collapse of two Bear Stearns funds with significant exposures to subprime mortgage-backed securities in June 2007 came the meltdown of quantitative equity fund strategies in August (Risk October 2007, pages 22-25). Various hedge funds have fallen by the wayside since, including Illinois-based Sentinel Management Group, Sydney-based Basis Yield Alpha Fund and the Peloton ABS Master Fund, run by London-based Peloton Partners.


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