Magnetar Letter to Investors About Our Story -- And Our Response — ProPublica

Series: The Wall Street Money Machine

Magnetar Letter to Investors About Our Story -- And Our Response

Responding to reporting by ProPublica, the Chicago hedge fund Magnetar sends a letter to investors criticizing the news coverage. It does not deny that it bet against CDOs that it bought, but emphasizes that its practices were not illegal.

by Paul Steiger

April 20, 2010, 10:46 a.m. EDT

On Monday, the hedge fund Magnetar sent a letter to its investors defending its practices and criticizing our story about it. (We received the letter from Bloomberg News.) The letter largely amplifies the statements its representatives made to us during our reporting, and which we included at length with our story. We are happy to link here to the Magnetar letter for those who want to see those arguments in fuller detail.

Magnetar’s letter doesn’t deny that it purchased collateralized debt obligation (CDO) equity, that it bet against many of those CDOs, or that it exercised influence over the construction of the portfolios. In particular, it doesn't deny and in one case admits that it pushed for higher returns and hence greater risk in the portfolios. At root, Magnetar says it did nothing illegal. Our story said that this is probably correct; violations of law or rule, if any, were more likely the responsibility of others. In short, we see nothing in our story to correct.

Read Magnetar's letter and our story.

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