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VW squeeze may hit hedge funds frozen by Lehman

Reuters – Several hedge funds with assets frozen at Lehman Brothers may have been hit by wrong-way bets on Volkswagen, industry executives said, possibly hurting funds on trades they cannot close.

While no money has yet been demanded by the prime brokerage unit of Lehman — which filed for bankruptcy protection in September — a fund using Lehman to short-sell VW may have to pay up next year when administrators have worked out which positions belong to whom.

"Could there be some people who are short Volkswagen and can’t close the trade? Yes, there could be some," said one hedge fund executive who declined to be named, in order to speak candidly.

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