Professor Elam

The Parkcentral Global Hub LTD Hedge Fund fell from $2.52 B to $266 M in a matter of months.

While that in itself is not unusal given what has happened lately, the fact that the Perot family was the biggest investor was unusual. This is not the sort of thing that made Ross Perot rich. Speaking as one who has worked for Ross, I suspect this Hedge Fund idea came from someone other than Ross.

Margin calls hastened the need to sell assets as this Fund like most others was highly leverage, ie, using lots of incredible debt. That is what caused so much selling, the need to raise cash to meet margin calls. This spiral down of selling   magnified the losses. IN short, we have a margin call as our security values have fallen. Okay sell something to meet the margin call. Whoops, now the value of other securities are down, so we need to sell some more to meet other margin calls. And before you know it, over $2 B is gone.

An old saying has it, shirt sleeves to shirt sleeves in three generations.  The idea is that grandad makes money and the kids, not understanding how he did it, then foolishly risk it away. I don't expect the Perot bunch to be looking for jobs but I imagine there was a serious I told you so conversation from Ross.