Hedge Fund Stuffs Banks And Makes $3bn On Subprime Bet

Hedge Fund

Financial News reports that US hedge fund Paulson & Co has turned a $500m punt on subprime into a profit of some $3bn.

According to the newspaper, the firm began betting that the US subprime market would head south last year, and took out a form of insurance which started to pay out as soon as subprime-related securities began to lose value. The firm is said to have bagged profits of almost $3.1bn on the play and, according to a Bloomberg report earlier this month, has locked in most of that profit, cutting its holdings of securities linked to subprime home loans by 86% across its 8 funds.

Founder John Paulson, an ex-Managing Director at Bear Stearns, started his firm in 1994. His Credit Opportunities fund was up some 690% this year to October, while Credit Opportunities II had risen 328% in the same period.

Meanwhile, Reuters reports that AQR Capital Management has moved to quash rumours that its performance has suffered in the recent market turmoil. The firm has now issued a statement, which said that 'in our long-only funds, all funds are up, in the single digit or double. Among our hedge funds, some are up in the double digits, while there are a few down, but only in the single digits. ...One hedge fund, which represents less than 1% of our AUM, is for the moment down in the double digits'.

Finally, Bloomberg reports that Carl Icahn's Icahn Capital Management had net realized and unrealized losses on investments of $133.7m in the third-quarter. The firm had $7.1bn under management as at the 30th September.

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