Hedge Fund Loses $300 Million in Less Than Two Weeks

by Derek Loosvelt | March 28, 2011

We all know that hedge fund investors can make millions of dollars in a matter of seconds (especially after receiving top secret 411 commonly known as "material inside information"), but they can also lose several million dollars just as quickly (when they aren't privvy to inside info and have to rely on their own investing instincts).

Exhibit A in the loser department is a big swinging European hedge fund investor named Phil. Phil (whose surname is Jabre and whose hedge fund is called Jabre Capital Partners) placed a few towers of his heavy chips into the Japanese stock market after the recent earthquake rocked the country, figuring that Japanese equities were underpriced and would soon rebound and, thus, he would cash in big. But it turned out that the Nikkei Exchange plummeted by 13 percent so Phil figured he better get out while he can (he was rather worried about the effects of those nuclear spills on Japan's economy) and thus he sold his position, cutting his losses. But it turned out that Phil was wrong again. The Nikkei actually rose right after Phil sold and Phil (and thus his clients) missed out on some decent-sized gains. In fact, Phil's quick losses in the wake of the quake wiped out all the money he'd made (and thus his clients had made) during the previous six months.

In Phil's defense, the effects of the devastating Japanese earthquake were not easy to predict. As Phil points out, "It's the first time a nuclear meltdown was at risk. It was hard to assess the consequences."

(WSJ: The $300 Million Blunder)

Filed Under: Finance


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