Independent – The collapse of Lloyds’ share price on Friday afternoon was deeply upsetting – and not just for shareholders in the bank.

Two weeks ago, those annoying folk at Paulson & Co, the hedge fund that has made a fortune from the credit crunch, took a sizeable short position in the bank. It looked like a duff bet: having sold Lloyds short at about 65p, the fund watched as the bank’s share price climbed to about 125p. And then the HBOS loss was disclosed and Lloyds plunged to 61p on Friday. That calamitous drop will have earned Paulson tens of millions of pounds. Darn it.

Bankers at the Japanese investment bank Nomura are cock-a-hoop at having earned fat fees advising Chinalco on its £200bn investment in the mining giant Rio Tinto. For various cultural and historical reasons, it is pretty unusual for Japanese companies to win work from China, so this was a breakthrough deal for Nomura. It was secured by the mining team that Nomura acquired when it bought bits of Lehman last year. In every cloud there’s a silver lining.

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Tags: breakthrough deal, chinalco, cock a hoop, collapse, credit crunch, friday afternoon, giant rio tinto, hbos, investment-bank, japanese investment, japanese-companies, lehman, lloyds, mining team, nomura, paulson, share price, short position, silver lining

New York (HedgeCo.Net) – The SRM Global Master Fund, headed by former UBS AG star trader Jonathan Wood, is down about 85% over the course of its two-year tenure, according to a report by the Wall Street Journal. 

Launched in September 2006, the fund grew fast, raising over $3 billion in assets in what was one of the largest European hedge fund kick-offs ever.  The fund held long equity positions in companies that were involved in takeovers, mergers or restructurings.  

Mr. Wood’s stellar UBS reputation earned him the trust of many affluent investors.  However, venturing into a hedge fund is very different territory.  Investors agreed to higher than normal lock up periods, some as long as five years, apparently not too concerned about potential risks.  Now many are barred from cashing out or even cutting their losses. 

The SRM fund has had a string investments gone sour.  They held a major stake in Northern Rock, which was nationalized by the British Government last year, causing shares to plummet.  Wood is currently seeking a judicial review. 

Adding to the unlucky investments is the stake that SRM held in Countrywide.  The mortgage lender was taken over by Bank of America for a deal that Wood thought undervalued them greatly.  Bank of America ended up with a steal, purchasing Countrywide for $2.5 billion. 

One notable investor in SRM is UBS, who in addition to providing their prime brokerage services, allocated about $500 million to the fund. 

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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