Another "hedge" collapse in Focus...

Discussion in 'Wall St. News' started by ASusilovic, Mar 4, 2008.

  1. Focus Capital has sold its entire portfolio of Swiss mid-cap stocks after the New York hedge fund - which had $1bn at the start of this month - missed margin calls and was forced to sell by its two biggest banks.

    Focus is said by people familiar with its operations to have lost about 80 per cent of its value, although the London-listed Psolve Niche Opportunities Fund, an investor, said in a statement it had written off its entire holding.

    The collapse comes as the volatile markets have taken down several credit hedge funds which could not meet margin calls, most notably London-based Peloton Partners’ $2bn ABS fund. But it is rare for an equity fund to have problems meeting margin calls, as typically equity investors are far less leveraged.

    In a letter to investors Focus said it was hit by “violent short-selling by other market participants” which meant it could not meet margin calls. On February 26 its two largest counterparties “forced it to sell”, the letter said.

    A spokesman for Focus declined to comment on the level of leverage it used, but denied rumours it had been pushed out of business by investor redemptions, saying instead it had been hit by the plummeting value of its investments.

    “It was like an avalanche,” he said.

    The firm, founded in early 2005 by Tim O’Brien and Philippe Bubb, had generated strong returns until this year. It is now expected to shut down, the spokesman said.

  2. I anticipate that this type of occurence will become (almost) as commonplace, relatively speaking, as home foreclosures are today, (over the past six-eight months), etc.

    Can't be helped, it's a near certainty.

    Kinda like that line in the movie Titanic, when the ship designer says, "The ship will sink, I assure you, it's a mathematical certainty".
  3. There is a beautiful pull out section in this week's The Economist magazine on the "fund management industry"
  4. "fund management industry" = "money skimming racket"
  5. Suss-----Did that fund have concentrated positions in the worst possible stocks?
  6. At least they had some positions in some well known Swiss stocks....

    ...Focus, a small companies equity specialist, slashed its position in Hiestand, a Swiss food company, from 32.9 per cent to just 0.9 per cent. On Thursday Lion Capital, the private equity house that owns Weetabix, said it had bought the stake.

    Focus also last week sold its 30 per cent stake in Schulthess Group, a washing machine manufacturer, causing the stock to fall nearly 20 per cent.

    Other stocks owned by Focus - including Forbo, a flooring company, and Huber & Suhner, the Swiss maker of wiring for the Eurofighter combat jet - also fell as the hedge fund sold its stakes...