Marko Dimitrijevic made a smart bet in December. The hedge fund manager, wagering the Swiss franc would fall, profited after voters there rejected a plan to have the central bank hold a fifth of its assets in gold.
Last week, the wager had a far bigger impact. In less than a day, it wiped out the 24-year-old fund.
The announcement caught traders and investors globally offguard.
The carnage is widespread. Brokerage firms in New Zealand and the U.K. failed and retail investors have suffered hundreds of millions of dollars of losses on leveraged foreign exchange trades. Citigroup Inc., the world's biggest currency dealer, lost more than $150 million, according to a person briefed on the matter.
Some mutual funds were also caught out. The $1.9 billion John Hancock Absolute Return Currency Fund (JCURX) tumbled 8.7 percent on Jan. 15, its steepest drop on record and the most among more than 2,000 U.S.-domiciled funds tracked by Bloomberg with at least $1 billion under management. The strategy is overseen by Dori Levanoni and Jeppe Ladekarl of First Quadrant, a Pasadena, California-based $19 billion investment firm that oversees other funds sold to retail investors and hedge funds.
Edited by Rogerdodger, 19 January 2015 - 09:47 AM.
