HedgeSpeak and Timing is Everything...

July 8, 1998

“As opportunities in convertible hedging dried up, a synthetic put program was implemented. This proved too costly and has been terminated.”

Focus on the date. The all too common cycle of a manager becoming frustrated by the cost of maintaining his hedge, and the investors frustration and pressure to generate competitive returns. Are investors really using "apples to apples" comparisons? Are they simply comparing to another manager who is not hedging consistently.

The irony in this case, is that the manager chose to terminate his hedging program one month prior to Long Term Capital Managements failure and the subsequent large market drop.