Hedge funds are confronted with margin calls in Lehman style as a market crash caused by the rates of President Donald Trump, increases the fear of an imminent 'black Monday'.
The sharp decline of the market has forced hedge funds to sell assets, whereby large Wall Street banks demanded collateral after the value of the companies has fallen sharply, according to sources that are familiar with the situation.
Many are now afraid of a repeat of the devastating 'Black Monday' from October 19, 1987, when the industrial average of Dow Jones dropped by 22.6 percent, the largest percentage of the history of one day.
It comes when a worldwide 'baseline' rate of 10 percent came into place last night and all American import except goods from Mexico and Canada hit. Come on April 9, around 60 trading partners – including the European Union, Japan and China – even higher rates will be confronted that are tailored to every economy.
After Trump's rate chaos, several large banks have issued the largest margin calls to their customers since the start of the COVID-19 Pandemie in early 2020.
The scale of the calls – in several sectors, including technology and consumer shares – has been worried that the steep sale will continue until Monday.
When margin calls are issued, they can make a vicious feedback loop because selling shares to meet the call can lower the prices more.
Gold fell by more than 3 percent on Friday and managed to win profits from earlier in the week, because investors were forced to throw precious metal to cover their losses.
Jeremy Irons in the film margin that focuses on the drama during the first staged of the 2008 financial crisis
The unrest coincides with the implementation of Trump's most far -reaching rates so far, which came into force on Saturday. Displayed: President Donald Trump holds a graph while speaking during a 'Make America RefeLaLy Again' trade announcement event in the White House on 2 April 2025
“Rates, shares and oil all fell considerably … It was the broad market movements that caused the scale of the margin calls,” a Prime Brokerage director told The Financial Times.
While another Prime Brokerage director noted: 'We are proactively contacting customers to assess [risk] About their entire portfolios. '
Prime Brokerage teams on Wall Street, which borrow money to hedge funds, held 'All Hands on Deck' meetings on Friday to prepare for the increasing volume of margin calls, sources told the Financial Times.
Thursday marked the worst achievements for the long/short stock funds based in the US since keeping track began in 2016, where the average fund suffers a loss of 2.6 percent, according to a new report by Morgan Stanley's Prime Brokerage Division.
The size of the sale about shares on Thursday was in line with the largest on record.
The report also pointed to share positions that resemble them during the American regional bank crisis in 2023 and the COVID-19 market sales in 2020.
The wider market decline, in particular in technology and high -quality consumer goods sectors, has worsened the situation.
The heavy sale led us net leverage with long/short stock fund – how many hedge funds borrow to increase their investments – to fall to a lowest point in 18 months of approximately 42 percent, Morgan Stanley reported.
Experts, however, believe that the damage could have been worse if hedge funds have not already started scaling back the stock positions and reducing leverage in response to the current trade war threats of the Trump administration.
In a different indication of stress within the hedge fund sector, gold fell – the precious metal that was usually seen as a safe haven for investors – 2.9 percent on Friday, despite the penetrating market pessimism.
Now Trump's 'Baseline' rate that came into place after midnight, called on the economic powers of the emergency assignment to tackle observed problems with the trade shortages of the country.
The trading locations, said the White House was driven by an 'absence of reciprocity' in relationships and other policy such as 'exorbitant taxes with added value'.
Come on April 9, around 60 trading partners – including the European Union, Japan and China – even higher rates will be confronted that are tailored to every economy.
