I shared a car service home today with a first-loss fund of funds manager who bragged that he can go to Goldman Sachs and get 20-1 leverage on a 50% net long vs 50% net short portfolio. “Better yet, BNP will offer 50-1 leverage on a portfolio margining basis, maybe even 100-1 if the portfolio is particularly well diversified.”
I had just come from a conference where some hedge fund managers regularly said that they ran exposures 450% net long versus 450% short. “We don’t really worry about our gross footings,” one manager explained. “All we really focus on is what our cVAR expected worst daily loss might be.”
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