Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Bloomberg – JO Hambro Capital Management Ltd., which oversees about $3.5 billion of assets, will close one of its two hedge funds partly because a bet against Volkswagen AG shares backfired, people familiar with the situation said.
The $240 million Trident European Fund dropped 25 percent in October, its worst month since starting a decade ago, mainly after a bet on a drop in Volkswagen shares went awry, said the people, who declined to be identified because the firm doesn’t disclose returns. The fund has slumped 39 percent this year after posting average returns of 8.4 percent annually since its inception.
Poor performance, dollar gains sapping European investment returns and investors moving assets from medium-sized companies all contributed to the fund’s closure, Suzy Neubert, a spokeswoman for JO Hambro in London, said in an e-mailed statement.
BBC Business – Hedge funds have lost £18bn in two days of trading in Volkswagen (VW) shares that briefly saw the carmaker become the world’s most valuable company.
VW shares rose 348% over Monday and Tuesday after it emerged that only about 5% of its shares were available.
Funds that had bet on the shares falling desperately needed to buy the shares to close their positions.
But VW shares fell 45% in trading on Wednesday as Porsche said it would help to solve the hedge funds’ problems.
"In order to avoid further market distortions and the resulting consequences for those involved, Porsche SE intends – depending on the state of the market – to settle hedging transactions in the amount of up to 5% of the Volkswagen ordinary shares," Porsche said in a statement.
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.
Times Online – Hedge funds were heading for a full-blown row with the German Government last night as it emerged that funds sitting on tens of billions of euro losses after short-selling Volkswagen could go bankrupt.
Porsche, VW’s biggest shareholder, stands to pocket a quick €6billion (£4.7billion) profit from the short-selling.
The London-based Alternative Investment Management Association (Aima), the hedge fund trade body, said yesterday that it planned to ask the European Union to clamp down on a controversial German legal loophole that allowed Porsche secretly to take its VW stake to almost 75 per cent.
Andrew Baker, Aima deputy chief executive, said: “This sounds somewhat irregular. If you tried that in this country, there would be a number of questions to be answered.”
Globe and Mail – Since many hedge fund managers like to drive Porsche roadsters, it’s somehow appropriate that the German auto maker just ran them down.
The European hedge fund community took a pounding Monday covering short positions in Volkswagen. Shares in the auto company doubled Monday on a short squeeze that came after Porsche announced it had used derivatives to build a 74 per cent stake in VW. That move brought a long-running takeover near the finish line, and also meant portfolio managers betting on a drop in Volkswagen shares had to cover positions.
In their rush to cover shorts, often at massive losses, hedge funds pushed up the value of Volkswagen by 123 per cent on Monday, briefly making the auto maker the largest company on earth. Shares subsequently slipped, but ended the day up 25 per cent.
Hedge fund manager David Einhorn’s Greenlight Capital suffered heavy losses in his portfolio when German carmaker Volkswagen’s shares spiked 82 percent on Tuesday, people familiar with his portfolio said.
The German carmaker briefly zoomed past Exxon Mobil to become the world’s biggest company by market value as hedge funds who bet Volkswagen’s price would drop further were forced to cover their positions.
Carmaker Porsche Automobil Holding SE surprised the market by announcing it had effectively gained control of 74 percent of Volkswagen’s voting shares.
