Thursday, 24 July 2014
Last updated 2 hours ago
Apr 20 2010 | 1:44pm ET
It’s hard to remember now, but before the Goldman Sachs collateralized debt case exploded on Friday, it was hedge fund Magnetar Capital that was at the center of criticism about subprime CDOs.
Two lengthy articles had profiled the Evanston, Ill.-based hedge fund’s subprime investing strategy. But the firm has moved to distance itself from the allegations against Goldman, which is accused of misleading investors about a CDO it structured for hedge fund Paulson & Co.
Magnetar told investors it did not “‘bet’ that any CDO, any group of CDOs, or the housing or mortgage markets as a whole would fail either in the short term or the long term.”
“There was no embedded view regarding the direction of housing prices, the rate of mortgage defaults or the subprime mortgage market generally,” it said.
What’s more, the Securities and Exchange Commission apparently offered its imprimatur to Magnetar’s practices, according to Bloomberg News. Lawyers for Goldman wrote that other CDOs, included two created for Magnetar, had better disclosure than its own Abacus series.
“At our meeting, the staff suggested that at least some market participants disclosed the involvement in the portfolio selection process of third parties that took short positions with respect to the CDO’s portfolio and referenced as examples the Auriga, Norma and Sorrento transactions,” the lawyers wrote in the statement to the SEC. Magnetar was behind the Auriga and Norma CDOs.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…