little bit more reward than senior, but they have less risk than this equity tranche.

He just runs a 2billion hedge fund called Clarium Capital. Why's he setting up meetings?

But you could call them I don't know let's call it

But definitely until about 2006.

Central Bank of China.

Frankly, it doesn't have to be a bank.

There are some good ones.

Let's say some of these borrowers start defaulting.

I really could see very little.

A tranche is just a bucket, if you will, of the asset.

Or private placements in some way.

And I'll tell you what a common hedge fund technique.

But you're like, no I want to sell them.

So I use it essentially just to build a big vault, right?

So from the public

And some of you all might know, about five years ago I was an analyst at a hedge fund.

This type of math is very very useful.

You can think of it that way.

Essentially these were private equity sales.

You just feel richer.

But anyway, I'll try to move on without my pen.

I was in Silicon Valley, this is what it was all about.

Boy, Sal, that sounds amazing.

An ongoing free press investigation turned the attention to who owns the voting machine companies.

So a sell side analyst is someone who publishes these reports.

You pay this guy 21 million or this group of guys or gals 21 million.

And then this top tranche, you could call it the most junior tranche. it's sometimes called the equity tranche.

But what you read about the most right now in the newspapers is mortgage backed collateralized debt obligations.

And to some degree, that's what's been getting a lot of these hedge funds in trouble.

And in the next video, I'll talk a little bit more about maybe who some of these investors were.

And maybe they give this tranche, and I'm making up things, but maybe they give it a AA rating.

And so you can imagine, here I was an analyst at a hedge fund.

And so you can imagine, here I was, an analyst at a hedge fund it was very strange for me to do something of social value.

So out of the 100 million every year, 24 million is going to go to these guys, 21 million is going to go to these guys, and then whatever's left over is going to go to the equity tranche.

I just realized you probably don't know what a hedge fund is.

I look around at my siblings and my cousins and as I said, there are a lot of us and I see teachers and musicians, hedge fund managers, designers.

And this is what you probably read some articles about, these hedge funds with these computer models to value their mortgage backed securities.

And some of you all might know, about five years ago, I was an analyst at a hedge fund, and I was in Boston, and I was tutoring my cousins in New Orleans, remotely.

I took 100,000 of it, turned it into cash, and just went on a great one year long vacation.

And if anything, we know that a lot of these hedge funds out there, they're doing more homework than me, the bank, or the lender is doing, or at least these ratings agencies are doing.

So all of the people who trade through that bank, all of the institutional clients, all of the hedge funds that have their prime brokerage accounts at those banks.

But what a common hedge fund technique was, to take advantage of this virtual cycle, to make the hedge fund founders very wealthy.

And we'll do another video on how they raise that money, and it's very related to how private equity confirms, and hedge funds also raise their money.

So in this situation what we did is we raised out of the 1 billion we needed 400 million from the senior tranche, 300 million from the mezzanine tranche, and then 300 million from the equity tranche.

And the reason that being able to predict those things is important, is not just because you might run a hedge fund and make money off of it, but because if you can predict what people will do, you can engineer what they will do.