Why do hedge funds blow up? [ Ссылка ] PLEASE LIKE AND SHARE THIS VIDEO SO WE CAN DO MORE This is interesting to me because recently there is a hedge fund who blew up trading natural gas. When I'm talking about a blow up I mean literally wiped out all the money. A wipe-out like the one I'm talking about is someone who blow out the whole lot and is just a disaster. But some people will also refer to a blow-up as a company that goes bust. That could be a hedge fund that is ultimately a company that is not performing. Maybe a lot of investors are withdrawing and the fund is not viable anymore. If a hedge fund can't perform they will have to close their doors.

LTC (Long-Term Capital Management) lost $4.6 billion
Amaranth lost $6 billion

To me the reason for these blowups is one thing - it is over-leverage in a position particularly in illiquid instruments and they can't get out fast enough. And that's basically the same reason most small traders blow-up as well. The better hedge funds have some real skin in the game and not just 'trade' with other people's money.

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