Large hedge funds see sudden reversal of fortune
Easy come, easy go.</br></br>Barely two months after closing a record year, the huge private investment funds that swing through international currency and bond markets are enduring a stark reversal of fortune.</br></br>Steinhardt Partners, Tiger Management, Caxton Corp., Omega Advisers and Soros Fund Management have had losses of hundreds of millions of dollars over the past few weeks. That's a setback of as much as 10% for some hedge funds, the private investment partnerships that borrow to the hilt to make big bets on the direction of markets.</br></br>But the gunslingers aren't suffering alone. The proprietary trading desks of big investment and commercial banks, which act as in-house hedge funds, have also been hit. Over the last several years, these institutions have been willing to accept an increasing amount of risk because of the benign environment of falling interest rates, which generally boost the value of fixed-income investments.</br></br>No more. With interest rates rising this year, one market after another has turned into Sherman's march to the sea. There seem to be as many ways to lose money as there were to make it last year. Among the causes of misfortune: the surprisingly steep decline of the dollar against the yen, which came quickly on the heels of rising interest rates in Japan and Europe.