How Banks Turned Into Giant Synthetic Hedge Funds

Odd Lots

Bloomberg

News, Investing, Business, News Commentary, Business News

4.4 • 1.6K Ratings

🗓️ 21 February 2025

⏱️ 48 minutes

🔗️ Recording | iTunes | RSS

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Summary

Hedge funds are notorious for making big and sometimes risky trades. Banks, meanwhile, are supposed to be a lot more boring by comparison — for obvious reasons. But in recent years, we've seen banks like Silicon Valley Bank make some pretty bad bets themselves. Elham Saeidinezhad, an assistant economics professor at Barnard College, Columbia University, argues that banks have been turning into giant "synthetic hedge funds" by blending traditional lending activities with advanced financial strategies. The big question, of course, is whether they should be doing this at all, given that banks typically operate with a lot more regulatory constraint and might not be as nimble when it comes to entering or exiting positions.

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