Updates, More Rumors, and Maybe Some Facts

First, the latest gossip - a rumor is circulating that uber quant fund DE Shaw is down 20%. It is unclear over what period or what effect this might have on the firm.

Another rumor is that SAC Capital has turned its quant programs in reverse so they are taking the opposite positions of the other quants in the market. Honestly, someone was bound to do this. If you sit around all day talking about your model, someone had to ask what would happen if everyone was running for the exit at the same time, and someone else had to quip 'we'll just run the model in reverse'.

Turns out it is not Goldman's Alpha, but its North American Equity Opportunities fund that is being shut down. Both funds appear to be quant driven, and neither has done well in the last month or for the year. The NA Equity Opportunities fund had around $750 mln under management. As of the end of July, the fund was down 15% for the year, and 11% in July. Apparently August was no better.

Highbridge Capital's Highbridge Statistical Market Neutral Fund (about 5% of the company's $37 bln under management) has declined 5.3% so far this month.

Black Mesa, another quant fund, has fallen 7.5% this month which was announced in a letter to shareholders. Analysts suggest the fund may be down an additional 10% since that letter was published.

There are rumors that Jim Simson's Renaissance Technologies fund has been affected. The flagship Medallion fund had been up 25% for the year as of the end of June.

Tykhe Cpaital is a NY fund founded in 2002 by refugees from DE Shaw refugees. The firm had $1.8 bln under management. There are a number of funds, some with losses as high as 20% in August. They have stated that they are not closing down, but of course that is what they all say before closing down. They had been using 4-to-1 leverage, which is being reduced to 1-to-1. One of the funds fell 7% in the first three days of August.

Campbell, an $11 bln fund, was down 10-12% at the end of July. I had looked at investing in this fund a few years ago. They couldn't tell me how they made money. Every question got referred back to the model which was a black box. Needless to say, I didn't give them any money.

If you've been sleeping under a rock, you might have missed BNP Paribas announcement that they have frozen three funds. The most interesting point is that they will no longer issue navs as the firm is unable to obtain market pricing on a number of its positions.

There has been speculation that West LB had significant losses in subprime and might be facing a liquidity crunch.

Dutch investment bank NIBC Holdings annced $180 mln losses from US subprime investments.

This is just a partial list of today's developments.

CFC has just announced it is taking a loss of $200 mln on mortgages already written, sees large increases in delinquencies, and is expressing less confidence in its ability to weather this storm. This is likely to send the markets down again tomorrow barring some unusually positive news to balance it off.

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