Stock Research Hedge Fund Fraud Leads To $160 Million Bear Stearns Settlement
It was announced recently that a Federal Bankruptcy court judge ordered Bear Stearns, one of Americas top tier trading firms to pay $160 million to investors who lost money with a hedge fund that cleared through Bear Stearns. While doing stock research on publicly traded brokerage corporations, we came across the settlement. This spurred us on to thinking, what does this mean for the everyday investor, and what does it mean for stock research in general. Heres the real story.
Hedge Funds Asset Base SKYROCKETS
Hedge funds have become a significant force in the investment world. At the beginning of the 1990s, hedge funds controlled less than $40 billion in assets, less than Warren Buffetts personal investment portfolio. Today there are more than 9000 hedge funds controlling in excess of $1.1 trillion dollars of assets.
Hedge funds also use leverage, averaging some six times their asset base. This means the industry today controls investments of about $7 trillion dollars. These investments are on both the long and short side. The mutual fund industry can only go long, and...
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