A week after the mid-October capital markets dramatic downturn, real estate conference attendees' fingers uniformly pointed at hedge funds as the culprits.
Speaking on a panel at the Urban Land Institute Conference in New York on Oct. 22, Wayne Brandt, managing director and national originations director, real estate capital markets in the Los Angeles office of Wells Fargo Bank voiced the opinion of others in the room that hedge funds caused the “blip” in the capital markets.
“The volatility of the (commercial mortgage-backed securities) last week caught everyone off guard,” Mr. Brandt said. “It was driven by hedge funds.”
Hedge funds were long on the oil trade and they bet that the interest rates would increase rapidly. So they bought U.S. Treasur-ies and corporate bonds en masse, he said.
“This explains the drop in (the U.S. 10-year) Treasury yields,” and the consequent drop in the interest rate charged for CMBS, Mr. Brandt said.
