Your money is safe with hedge funds

Gamestop, Robinhood and the Hedge FundsDangerous game for small investors

The stock market crime continues. In the past two weeks alone, the papers of the retail chain Gamestop have risen by 2000 percent - work with sharp fluctuations. After making arrangements on the Internet, many small investors bought the shares and thus drove them up. Hedge funds therefore also have to buy back shares for their bets, which drives the price further. In the meantime, some of the online trading exchanges where retail investors buy and sell stocks have at least temporarily restricted trading in Gamestop papers.

The Robinhood platform drew a storm of indignation yesterday because it only allowed sales of Gamestop papers, but no more purchases. In the meantime the platform has given in and resumed trading. FDP and left-wing politicians in Berlin called for the stock exchange supervisory authorities to intervene in such cases, because this would put small investors at a great disadvantage compared to big players such as hedge funds. Elsewhere, calls for transparent regulation are loud.

"The problem, which partially affects not just a share but an entire market, already raises the question of the extent to which we have to regulate here. But now the most important task is to determine where the chains of effect are and which regulation is necessary and targeted, "says Professor Sascha Steffen. He is a financial expert at the Frankfurt School of Finance and Management.

"Normally it turns out badly for small investors"

In the US, the future chairman of the US Senate banking committee, Sherrod Brown, announced a hearing "on the current state of the stock market". It is time to make the economy work for everyone, not just Wall Street. Even if it should now be possible again to trade Gamestop papers on most trading venues, experts like Hendrik Leber advise caution. He is a fund manager at the asset manager Acatis:

"It really rocks, and as they say so often: Greed eats the brain. It actually has nothing to do with the company, it's just a gamble, and it usually turns out badly for small investors."

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Sascha Steffen also foresees problems - especially for small investors: "If someone with little money and a small stake was able to make 100 percent profit within one or two days, then that means that the next time he will be with a lot Speculated for higher stakes and then the whole thing runs against him. I think there is still a lot of need for education for investors here. Investing in stocks, yes, but not in individual stocks, that contradicts all logic.

Presumably, this will not prevent the many small investors from lively trying their luck and speculating with the Gamestop papers at the moment. Today at least they continue to skyrocket with great fluctuations. In the end, however, Sascha Steffen fears, there will only be losers:

"These will be hedge funds that have positioned themselves so massively against it, because it is simply not possible with such a share with so many private investors. Then it will be the small investors who invest here now and do not get out in time. But then it will be different, because hedge funds may have to sell other securities to make up for losses and that will then lead to a downward spiral in other securities. That means that more or less affects all of us who invest. "