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October 17, 2006

Mega Trouble at Vega Asset Management

posted by MR WAVETHEORY at 10/17/2006 04:29:00 AM
I first wrote about Vega's troubles earlier. The world reknowned hedge fund had $12 billion in assets under management a few years ago, but assets have been dropping - it was down to $6 billion in January. The WSJ says that Vega now has "just" $5 billion and the Vega flagship fund is down to about $1 billion in assets under management from $1.5 billion earlier in the year. Vega Select Opportunities has is down 17% this year. It was down 10% in September alone and down 18% for the quarter.

Data in this table based on: September 2006 performance.
NAV Monthly RoR Quarterly RoR YTD RoR 1 Year RoR 3 Year RoR 5 Year RoR Since Inception
20882.03 -10.63% -18.15% -16.68% -15.39% -3.59% 6.27% 12.33%

"If you join Vega and dine with me you will enjoy a lot of fine wines, I have a hell of a cellar," Mr. Mehra says.

This summer Mr. Mehra's bet against bonds became a problem, in part because the attributes of the firm that attracted investors began to undercut Vega's performance. He and his team figured that the U.S. economy would continue to expand and that inflation could be a problem, putting pressure on bond prices. But bonds rallied sharply in September. Vega's risk techniques forced the firm to exit from many of its losing positions last month -- just before the bond market headed south, a move that would have been profitable for Mr. Mehra had he held on to his investments.

That is some awfully expensive wine. Better luck in Vegas! Better wine too! (And it's usually on the house!)

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