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00:00AROUND BUT LAYING A MARKER CLEAR, THEY INTENDS TO COMPETE THROUGH NEXT TUESDAY. >> BERNIE SANDERS FIGHTING UP TO THE LAST VOTE. MARGARET TALEV JOINING US FROM THE WHITE HOUSE. >> THANK YOU SO MUCH MARK. STILL HERE WITH DON STEINBRUGGE. WE WERE TALKING ABOUT THE MAY CROW ENVIRONMENT AND LOT OF RISK IN THE CAPITAL MARKS. THIS UNCERTAINTY ABOUT THE PRESIDENTIAL ELECTION IS ONE OF THEM. WHAT DOES IT MEAN FOR CORRELATION ASSET CLASSES? >> FIRST OF ALL, IF YOU LOOK AT WHAT HAPPENED IN JANUARY AND FEBRUARY OF THIS YEAR, IN THE HEDGE FUND INDUSTRY, STRATEGIES HAD LOT OF BETA EXPOSURE HIGHLY COROLLATED. THEY WENT DOWN AND THEY WENT DOWN A LOT MORE. LOT OF STORIES ABOUT ACTIVIST DOING BAD, STRESS DEBT AND. WHAT IS HAPPENING IS, YOU BEGINNING TO SEE MONEY SHIFT AWAY FROM STRATEGIES THAT HAVE A LOT OF MARKET EXPOSURE. STRATEGIES UNCOROLLATED. YOU'RE SEEING INTEREST IN STRATEGIES LIKE DIRECT LENDING WHERE THERE'S INEFFICIENCY IN THE MARKET. VERY WIDESPREAD. YOU CAN GET HIGH RETURN, CTA'S ARE OF INTEREST TO PEOPLE BECAUSE THEY -- AS A MATTER OF FACT, THE OPPOSITE MOVEMENT OF CORRELATION OF THE CAPITAL MARKETS. WHEN THE MARKETS SELLOFF, MOST CAPITAL MARKET CORRELATIONS GO UP. TREND FOLLOWING CTA'S CAN GET NEGATIVE. YOU'RE SEEING INTEREST IN REAL ESTATE CLASSES LIKE REINSURANCE. IT HAS NO CORRELATION TO THE CAPITAL MARKET. THERE'S A BIG SHIFT GOING ON IN THE HEDGE FUND INDUSTRY AWAY FROM MARKET ORIENTED STRATEGIED. STRATEGIES THAT PROTECT PORTFOLIO. >> THERE'S A QUESTION ABOUT THE LIQUIDITY OF THOSE ALTERNATIVE STRATEGIES. CROWDED TRADE. >> BASIC THEY'RE ALL IN THE SAME STOCK. >> AGAIN, HEDGE FUNDS ARE A STRUCTURE. THEY'RE NOT AN INVESTMENT STRATEGY. THEY'RE A LOT OF INVESTMENT STRATEGIES WITHIN HEDGE FUNDS THAT AREN'T COROLLATED. SOME OF THEM ARE HIGHLY LIQUID, LIKE CTA'S. LOT OF REINSURANCE CONTRACTS AND THEY DO BECOME LIQUID. YOU GOT TO BE CAREFUL WHAT STRATEGIES YOU INVEST IN. >> THE LACKLUSTER RETURNS WE'VE SEEN FROM HEDGE FUND HAS LED TO A LOT OF CALLS ABOUT HOW THE FEE MODEL IS BROKEN. DO A LOT OF PEOPLE GET DISCOUNTS OR FOUNDER SHARES THROUGH OTHER MEANS? HOW MANY PEOPLE PAY 2020? >> THERE'S A LOT OF DISCOUNT IN THE DISCOUNT IN THE HEDGE FUND INDUSTRY. MOST HEDGE FUND ARE NOT LOWERING THEIR STANDARD FEE. WHAT THEY ARE DOING FOR INSTITUTIONAL INVESTORS, THEY'RE HEAVILY NEGOTIATING FEES. LOT OF THESE PENSION FUNDS ARE GETTING 25% TO 50% DISCOUNT.

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Looking Beyond Hedge Fund Market Uncertainty

Don Steinbrugge, managing director at Agecroft Partners, discusses recent scrutiny on the hedge fund market. He speaks on "Bloomberg Markets." (Source: Bloomberg)

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