A number of hedge funds that have shared their July results appear to have fared very well by placing bets against subprime loans and other risky debt, The Wall Street Journal reports.One fund that did exceptionally well in July is Hayman Capital Partners, up 60% in July and 240% year to date. “The availability of credit has disappeared, and there are $220 billion of [leveraged-buyout] loans that need to be financed,” said Hayman Managing Partner J. Kyle Bass. “It is going to smoke investment banks, and many more funds will be carried out.”
Balestra Capital Partners enjoyed gains of 28% last month and is up 80% for the year. Last year, when it first shorted U.S. housing and subprime loans, it lost 3.5%. But it stuck with its mission, which is obviously paying off now.
“We were just early about playing the theme last year, but now it’s playing out quickly, and we think there’s further to go,” said Balestra partner Norman Cerk. “This isn’t a contained problem.”
MKP Capital Management also first took bearish bets on the sectors last year, and its five hedge funds are up between 10% and 26% so far this year.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.