Navigation

Current news for this fund:


Focus Capital - Small cap equities (Swiss-centric)

2008-03-04

Count of distinct funds: 1
Capital base: $1B
Loss: ~80%

Comment on this article | Subscribe by email!

stories: ft.com, co.uk

FT has the story on another fund apparently pulled down in the undertow of deleveraging:

Focus Capital has sold its entire portfolio of Swiss mid-cap stocks after the New York hedge fund - which had $1bn at the start of this month - missed margin calls and was forced to sell by its two biggest banks.

Focus is said by people familiar with its operations to have lost about 80 per cent of its value, although the London-listed Psolve Niche Opportunities Fund, an investor, said in a statement it had written off its entire holding.

... it is rare for an equity fund to have problems meeting margin calls, as typically equity investors are far less leveraged.

In a letter to investors Focus said it was hit by “violent short-selling by other market participants” which meant it could not meet margin calls. On February 26 its two largest counterparties “forced it to sell”, the letter said.

It seems no asset class is safe. Which, of course, was exactly our point in founding this site. A credit collapse hurts most in paper assets; but leverage makes anyone who uses it much more vulnerable.

The article also states "The firm, founded in early 2005 by Tim O’Brien and Philippe Bubb, had generated strong returns until this year" and that it will now be shut down. The Telegraph article points out that Focus even won a "coveted" EuroHedge award after returning over 100% in 2006. Apparently, it was not so well hedged, leading us to wonder what EuroHedge is doing giving out awards to outfits like this. Or maybe the whole "hedging" aspect has been completely done away with, in favor of impressive short-term gains with a much greater "wow" factor.

Focus' investors, on the other hand, are likely not very "wowed" anymore. Assuming they did lose about 80%, in theory they'd need more than two years of those 100% returns to get back where they were just before the fund's collapse. And that is a tall order for anyone to fill.

If you have more gory details, don't be shy—send them over.

permalink to this record | forum thread


Comments: Be the first to add a comment

add a comment | go to forum thread

Important: This fund is on our list of hedge funds that have "imploded" (see also ailing lenders). However, please note that "imploded" is a somewhat subjective. The "imploded" list contains hedge funds (or other unregulated and autonomous speculative investment funds) which have gone through some sort of permanent adverse change. This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid mark-downs in net asset value; or abnormal "bail-out" by corporate parents or peers in order to avoid write-downs and provide liquidity. The funds are of any type and sector.