Understanding pod shop leverage & cash usage
Don't work at a pod. Trying to understand the economics & pnl calculation a bit better.
Let's say a PM gets a $100mm capital allocation, or $200mm gross market-value post-leverage, which is 2x leverage. Does that mean that $100mm of cash is being fronted by the HF, and $100mm of cash is being borrowed from a prime broker? What is the cost of that leverage? Is that cost subtracted from your pnl for the year? Is that cost based only on the amount of leverage actually utilized (rather than the total amount available)?
Also, is this leverage separate from the leverage obtained by repo'ing financial securities themselves? Meaning, if I buy a stock and repo it at a certain % haircut (e.g. 50%), that would represent even more leverage?
How does unused cash get factored into pnl? Does unused cash accrue at money-market rates (i.e. >5% annualized today)? Or is unused cash just counted as contributing 0 pnl for the PM? Or possibly negative?
If you have a $200mm GMV post-leverage allocation, then, factoring in realistic repo terms, what's the max amount you can be long (i.e. market value of all stocks you own) and max amount you can be short (i.e. market value of all stocks you're short), to be "fully deployed"?
Lastly, I'm assuming this is an L/S equity book (partly for simplicity), but are there any differences to these answers if we're talking about a macro book or a credit book?
Bump
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