- The Paradigm Hedge Funds had only between two and three hundred million dollars under management, which were leveraged to over five hundred million, not the more than $1.5 billion under management represented to us by Lotito and Fasciana.
- The returns on the Paradigm Hedge Funds were not as represented to us by Lotito and Fasciana; and
- The primary manager of the funds, Dr. James Park, had an apparent substance abuse problem and had been an absentee manager for several years...
Dear Fellow Investors:The global economic stress as measured by FX short term volatility, sovereign and corporate CDS spreads and VIXX indices persisted in the month of February, as the barrage of negative economic indicators remained unabated.Continued stress on the financial sector that peaked with the record quarterly loss of AIG and the collapse of Citigroup equity valuations has left policy makers and market participants perplexed as to how the current turmoil will be resolved.The month of February marked one of the most complex environments in foreign exchange that we have experienced since the inception of the Fund, as the ambiguity in governmental commentary on interest rate decisions and the measures being considered to aid the distressed economic climate caused abnormal gyrations in the G10 arena.We remain committed to our long DXY bias but as was mentioned in last month’s commentary, we have preferred to express this through a short EUR/USD bias and selectively partially imperfectly hedge it with a lower weighted long GBP/USD trade.We believe that the euro zone will continue to be weighed down by the massive 1.3 tn. EUR of outstanding debt of Eastern Europe that will be a challenge to refinance at reasonable yields in the current climate.The reversal of our short USD/JPY hedge was well-timed, as the announcement of the reissuance of U.S. Treasury samurai bonds to the Japanese marketplace has accelerated the upside momentum in USD/JPY. We have decreased the size of our short EM bias as commodity prices appear to have temporarily stabilized and we prefer to selectively express views through cross regional plays such as short EMEA/LatAm with underweights in HUF, PLN and overweights in CLP, BRL.We will continue to utilize low quantities of leverage and fewer numbers of intraday positions, as we anticipate the persistence of a high volatility marketplace into the end of Q1 2009.