The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Hedge funds to the rescue!

Who is there to save the day when hedge funds have a blow-up? Why, it’s other hedge funds, which can make a profit clearing up the mess.

Recent events contradict the theory that hedge funds are a threat to the stability of financial markets. In fact, they have proved their usefulness in containing damage and easing market fallouts.

Take the sub-prime market. Bear Stearns is dominating headlines after two of its hedge funds got caught out on sub-prime mortgage bets and lost a not insignificant amount of money. But how much have other hedge funds that have been shorting the ABX or selling sub-prime bonds been making this year? Probably as much as Bear Stearns has lost, if not more.

Adding further to the mix of buyers and sellers are hedge funds that have been buying up loans at a discount, bolstering the market, and bailing out financial institutions that had a sub-prime mortgage mess on their hands. If it hadn’t been for the ability of hedge funds to jump in, aiming to profit from niche opportunities, the blow to the financial markets over the sub-prime fallout might have been much bigger already.

Hedge funds don’t act in unison. There are buyers and there are sellers, and these days, with 10,000 hedge funds, there are a lot more buyers and sellers preventing markets from moving in one direction only; or at least in one direction only in a very short period of time.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree