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October 03, 2006

Hedge Funds Blowup - Vegas Management Down $9 Billion Following Amaranth Footsteps

posted by MR WAVETHEORY at 10/03/2006 09:42:00 PM

While the business rags are raving about the big disaster that was Amaranth Advisors (in case you were wondering what an amaranth is: it's a weed), few have talked about the massive losses at Vega Asset Management based in Madrid Spain. Vega, or should we call Vegas, which managed $12 billion just a few years ago and $6 billion in January, now has about $3 billion in the bank. They've lost about $9 billion in assets even more than the $6 billion lost by Amaranth. The Vega Select Opportunities Fund, once the flagship, now manages $1.4 billion. Manager Ravinder Mehra took all that money to Vega(s) and bet against bonds. Oops! He's down 17.5% this year. To make that back, he has to roughly make 35% just to break even. Below is the data courtsey of Lipper.

Data in this table based on: August 2006 performance.
NAV Monthly RoR Quarterly RoR YTD RoR 1 Year RoR 3 Year RoR 5 Year RoR Since Inception
23365.81 -9.76% -8.42% -6.77% -2.17% 1.84% 9.49% 14.54%

Do you see a trend? Well, going from right to left, it looks like the more recent the performance figure you examine, the more negative it becomes! What a perfect trend - down. Something tells me that investors in Vega would like to see it go the opposite way.

Meanwhile, the more risk averse among the hedge fundies are busting out of hedge fund land back into banking. Eton Park lost Stuart Hendel who is going back to the prime brokerage side of the business at Morgan Stanley (NYSE MS). Eton Park, founded by Eric Mindich of Goldman Sachs Group, Inc. (NYSE GS) has about $5.5 billion. It's up 7% this year.

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