
Hedge Funds Pumped Up Silicon Valley, Now They're Pulling Out - sharkweek
http://www.bloomberg.com/news/articles/2016-03-24/hedge-funds-pull-back-in-silicon-valley-as-ipo-market-atrophies
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ChuckMcM
Watching this version of tech bubble unwind has been very interesting. The
hedge funds pulling out, the markdowns on unicorn value. If this is a typical
cycle it means that the oxygen(cash) will be depleted for a few years while
the losses are absorbed. The lack of investment will recharge funds as new
money comes in, and everyone will wait for some breakout hit to come out. Then
cursing themselves for having "missed" it by being to hesitant they will once
again start opening the money taps. Circle of life in the valley.

~~~
bRad389
whats your guess on how long before will housing be affected?

~~~
djb_hackernews
I don't think housing will be affected the way you think it'll be affected.

Hedge funds are buying lots of real estate, Single Family Homes included [0]
[1] [2]

It's a flight to safety, and with jobs moving to cities, millennial
preferences with them, and restrictive zoning/NIMBY, real estate is the
perfect landing place.

[0] [http://www.motherjones.com/politics/2013/11/wall-street-
buyi...](http://www.motherjones.com/politics/2013/11/wall-street-buying-
foreclosed-homes)

[1] [http://dealbook.nytimes.com/2014/06/27/investors-who-
bought-...](http://dealbook.nytimes.com/2014/06/27/investors-who-bought-
foreclosed-homes-in-bulk-look-to-cash-in/?_r=0)

[2] [https://newrepublic.com/article/112395/wall-street-hedge-
fun...](https://newrepublic.com/article/112395/wall-street-hedge-funds-buy-
rental-properties)

~~~
bRad389
thanks for your insight

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iaw
Exit value volatility was a known risk when the hedge funds started investing
in the Valley.

Exit timing volatility is a new phenomenon. It's one thing to say, "within 5
years they'll be publicly traded/acquired and I'll have liquidity at an
unknown value." It's another entirely to say, "in an unknown amount of time
the company will be publicly traded/acquired and I'll have liquidity at an
unknown value."

The latter prevents the hedge fund from actually creating hedges.

~~~
ConfuciusSay02
It's been quite a while since hedge funds were actually in the business of
hedging.

~~~
eldavido
yeah, we need a different name for these things, like FAM, "flexible asset
managers", or AIMs, alternative asset managers. The key point is that they can
do whatever they want, not that they "hedge" anything.

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gmarx
Unregulated mutual fund?

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harmegido
Hardly. There's tons of regulations around them.

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nissimk
It's unreasonable to assume that the faucet for investment money will be open
indefinitely, especially when investors don't get the benefits they would have
with a public company: liquidity, transparency, etc.

Staying private indefinitely is not just regulartory arbitrage, it's also
maintaining significant control and information assymetry between managers /
early investors and the rest of the investors and employees.

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stephenitis
Maybe viable business models after seed stage funding has run out might become
a thing again.

~~~
FussyZeus
Wait wait, you want companies to make money off the product they sell? That's
so 90's.

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ConfuciusSay02
What? Revenue? No, no, no, no. No revenue.

Why would you go after revenue?

If you show revenue, people will ask how much, and it will never be enough.

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pbreit
Or "The dumb money showed up, got burnt, bailed."

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datashovel
Why own shares of a valuable business when you can buy the entire business for
pennies on the dollar when they're about to go bankrupt?

EDIT: Then sell them during the next bubble.

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chris_wot
Oh man, I'm so going to be downvoted on this, but...

 _" I’m done with intangible valuations, unknown exits, unknown liquidity, and
I want something that if I put my money into it now, I’m not going to hit a
grand slam, but I’m going to get something that’s immediately yielding."_

Since when has a combination of intangible valuations, unknown exits and
unknown liquidity every been anything other than an extremely high risk
proposition?

~~~
prewett
Sounds like what the author wants is a bond or dividend stock, not a startup
fund.

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eruditely
These things are going to happen anyways, a feature of anti-fragile systems is
that they can handle and deal with volatility and stressors, so we're going to
be fine.

The easy times can't always be in, and you will never catch the next good
times if you're not in it well beforehand.

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paulpauper
yaaawn more misleading titles. 'Pulling out' would imply lower valuations, of
which there is no evidence for startups like Snapchat, Pinterest or Uber.
Instead of selling, what is happening is that we're seeing a flight to
quality, which is something I predicted months ago.

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trhway
when in the end of 2013 and in 2014 pension funds and similar money from out
of state started to be 'absorbed' [through hedge funds of course] into the
Valley, it kind of was pretty clear that this is the last, the 'IPO' wave, ie.
the last fools who will be holding the bag (which is sold to them by Valley's
VCs). The Valley has got these money now, will catch the breath and will be
getting ready for the next wave...

The thing can become interesting if somebody happened to have sold/bought a
good [leveraged] amount of bonds and CDS on all those startups around - i mean
it is pretty obvious that pooling startups together into a bond would make it
an AAA bond the same way like pooling subprime mortgages before 2008 produced
AAA bonds :)

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st3v3r
And nothing of value was lost.

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slug_tro_AWAY
How Freudian!

