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In effect the country was operating like a giant hedge fund, borrowing cheaply to invest at a higher return.After peaking at £291 billion in 2007, foreign earnings dropped sharply as the financial crisis struck, falling to £161 billion by 2010.
For those with $5 million or more in assets, it has added a special wrinkle: a warrant that lets investors put up a portion of their stake in the fund, borrowing the rest from Bear Stearns.
Savings rates have been falling since the Funding for Lending scheme was launched last August because lenders no longer need to rely on savings deposits to fund borrowing; there are fears this trend may not stop.
Those funds are going to be squeezed as short rates rise: Dividends that investors reap from these leveraged portfolios will be pared because of ever-costlier fund borrowing.
As we first opined in May, we believe margin debt has been soaring mainly because prime brokers are more fully reporting hedge fund borrowing in the U.S. as margin debt.
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The fund borrows, on average, about $3 for every dollar in the fund.
But the profit would be large if the fund borrowed a lot of money to take a large position.
Known as shorting, a fund borrows shares from a City investor who charges a fee for the service.
But if the disability trust fund borrowed money from Social Security's old-age trust fund, the loan would have to be repaid, officials said, and the measure would not solve the programs' problems.
This fund borrows money at slim short-term rates to buy risky assets paying fat long-term coupons.
That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers.
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CEO of Professional Science Editing for Scientists @ prosciediting.com