A Fund Behind Astronomical Losses ($)
THE WALL STREET JOURNAL - Page C1 - January 14, 2008
By Carrick Mollenkamp and Serena NG

EXCERPT

[Magnetar's] trading highlights the important role some hedge funds played in the great debt unwind that is now plaguing financial markets. Many hedge funds realized early on "that the loans and securities that went into CDOs were extremely toxic, and they designed structures to exploit that," says Janet Tavakoli, a structured-finance consultant.

[This is the classic long equity (that hives the excess spread from a deal) and short the mezzanine tranches. See Pp. 261-265 of my 2003 book: Collateralized Debt Obligations and Structured Finance, John Wiley & Sons].

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