Swiss Franc Trade Is Said to Wipe Out Everest’s Main Fund http://www.bloomberg.com/news/2015-...-is-said-to-wipe-out-everest-s-main-fund.html " Marko Dimitrijevic, the hedge fund manager who survived at least five emerging market debt crises, is closing his largest hedge fund after losing virtually all its money this week when the Swiss National Bank unexpectedly let the franc trade freely against the euro, according to a person familiar with the firm. Everest Capital’s Global Fund had about $830 million in assets as of the end of December, according to a client report. The Miami-based firm, which specializes in emerging markets, still manages seven funds with about $2.2 billion in assets. The global fund, the firm’s oldest, was betting the Swiss franc would decline, said the person, who asked not to be named because the information is private. Armel Leslie, a spokesman for Everest Capital with Peppercomm, declined to comment on the losses. Calls to Dimitrijevic weren’t returned. The SNB’s decision to end its three-year policy of capping the franc at 1.20 a euro triggered losses at Citigroup Inc., Deutsche Bank AG and Barclays Plc as well as hedge funds and mutual funds. The franc surged as much as 41 percent versus the euro on Jan. 15, the biggest gain on record, and climbed more than 15 percent against all of the more than 150 currencies tracked by Bloomberg. Dimitrijevic grew up in Switzerland and comes from what he terms a Yugoslavian family, according to “Inside the House of Money” by Steven Drobny (Wiley, 2006). He started the firm in 1990 with $8 million and has seen assets rise and fall as investors rushed in and out of emerging markets. Navigating Crises Everest grew to $2.7 billion by the start of 1998 after navigating crises in Mexico and Southeast Asia. Russia’s default and currency devaluation proved trickier and assets fell by half amid losses. He revived the firm and a decade later Everest managed $3 billion. Then the global financial crisis hit, and assets shrunk by $1 billion. Last year, the main fund rose 14.1 percent, driven by Chinese equities and bets against currencies, including a wager that the Swiss franc would fall after citizens rejected a referendum that would require the central bank to hold at least 20 percent of its assets in gold, the investor report said. "
http://www.elitetrader.com/et/index...rgin-call-negative-balance-what-to-do.289054/ Question: I am just wondering if the fund was a CTA program, how its clients would face/resolve any potential liability of loss incurred with their Individual accounts!
In 'Black Swan' Taleb writes about 'never base risk assessment on historical data'... His suggestion was to have a protective stop placed to limit your risk to the 'most you are willing to lose' on each position. In this case stops did not work. The unpeg happened during the main portion of the trading day. There was no 'whisper campaign' over the previous days and weeks to warn friendlies of a possible unpeg. I did not see articles of SNB 'concerns'... Next week Draghi could announce a QE package, or not announce, could that also trigger another extreme trading day for all of the EUR pairs? How to profit without exposing the account to a blowup? Are FX futures a better alternative? So how do individual traders and hedge funds/CTA quantify the risk of EURCHF in advance? Thank you
Futures offer FX options that can help protect against tail risk without the need for liquid, continuous markets that a Stop requires. Not sure if FX spot brokers offer options. But even if they do and then they become insolvent when something extreme like this happens, you're still in the hole. One week ago, my two "risk-off" assets were gold and swiss francs, a hard currency and a fiat currency. Hmmm, need to re-think that.
Are FX futures a better alternative? Perhaps, Yes! It's part of a basket of exchange traded instruments, with better risk management mechanism relatively which includes much more regulated, sophisticated and structural margin rules for dealers/brokers that the FX lacks, and some other risk based features/warnings/alerts, as far as I understand. Of course, I could be very wrong!
Correct! imo Spot FX used to be traded by institutional speculators, rather than for retailers as nowadays doing in this Internet age, as far as I can recall.
So over the last 17 years this guy has lost hundreds of millions. Stellar record! Guy had a few good years then two decades of shit yet still somehow manages to raise billions......Typical "hedge fund guru".