Hedge fund Magnetar Capital had returned 25 percent in 2007 with a strategy that presented investors significantly lower risk than the S&P 500. Magnetar had made more than $1 billion in profit by discovering the equity tranche of CDOs and CDO - derivative instruments were relatively mispriced. Now it was the occupation of Alec Litowitz, chairman and chief investment officer, to provide his team with guidance as they planned next year's strategy, assess and prioritize their thoughts, and create new ideas of his own.
An ocean away, Ron Beller was pondering some quite different issues. Peloton Partners LLP, Beller's firm, had been among the top-performing hedge funds in 2007, persistent in excess of 80 percent. In the late January 2008 Beller acknowledged two high-status awards at a black tie EuroHedge ceremony. A month after, his company was broke. Beller shorted the U.S. home market before the subprime catastrophe hit, and was paid handsomely for his bet. The trade moved in a big way on February 14, 2008 against Peloton, causing $17 billion in losses and closure of the company.
PUBLICATION DATE: June 01, 2009 PRODUCT #: KEL402-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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