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Investment Banks, Hedge Funds, and Private Equity, 2nd Edition by David Stowell

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A Tale of Two Hedge FundsMagnetar and Peloton

 “It was the best of times, it was the worst of times …”

 —Charles Dickens

What a Year

Magnetar Capital had returned 25% in 2007—only its third year in business. This return was achieved with significantly lower risk than the S&P 500. Investors were happy; assets under management were among the largest of any hedge fund manager and growing.

On the other hand, the team at Magnetar recognized that investors can have short memories. Magnetar needed to consistently generate new ideas in order to meet investor return objectives. Formerly well-respected hedge funds such as Peloton, Thornburg, and Carlyle Capital were closing at a record pace due to illiquidity. Even the world’s largest banks were not immune ...

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