HedgeCo.Net (West Palm Beach) – Billion dollar hedge fund firm Scion Capital shocked investors with its recent decision to liquidate its profitable Asian funds. The decision comes from Michael Burry, head of Scion, who says that they wish to focus on the opportunities created by U.S. economic troubles.
"The primary motivation for this move is that I foresee a significant opportunity to invest in dramatically undervalued distressed assets and out-of-favor businesses over the next several years," Burry wrote in a letter to investors that was obtained by MarketWatch.
Scion’s Asian funds oversaw about $200 million in assets and returned between 80% and 116% since they started in early 2005. Money will be returned to investors beginning at the end of the first quarter. If they choose, they can put that money into Scion’s other global funds.
Scion was one of the first hedge funds to take advantage of the subprime mortgage crisis, when it spotted trouble in 2005. The ensuing credit crisis sparked returns of more than 130% last year alone. Burry has cut most of his short bets, $1.7 billion worth to be exact, reinstating his confidence in the federal government and regulators.
"The pressure is immense in politicians, policymakers and corporate leaders globally to keep this from becoming a financial Armageddon."
It is unclear the exact nature of their future investment strategies, but it will most likely focus on equities. Burry explains that they may invest in the debt of bankrupt companies, as a way to claim a stake in the future equity of the business.
Julie Scuderi
Contributing Editor for HedgeCo.Net
Email: [email protected]
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