Saturday, July 12, 2008

The Decline of a Subprime Mortgage Hedge Fund

The International Herald Tribune writes about the downfall of the Horizon Strategy hedge fund, run by John Devaney, which invested heavily in mortgages.
On Wednesday Devaney, who made and then lost a fortune trading mortgage investments, finally called it quits. He shut his hedge fund, and told his investors that all their money was gone too. ...

It is a stunning downfall for Devaney, whose brash bets in the markets — and equally brash public pronouncements on the perils and promises of subprime mortgages — made him something of a Wall Street celebrity.

For Devaney, things finally unraveled in late June, just before his 38th birthday. Deutsche Bank called in margin loans, demanding that he pay back $90 million by the next day. When he could not pay, the bank seized his fund's assets on June 26 to auction them, he said. Deutsche Bank declined to comment.

Devaney's Horizon Strategy fund, founded near the height of the mortgage bubble, is just the latest hedge fund to fall victim to the credit squeeze. ...

Many of the hedge funds that have run into trouble lately bought the same sort of mortgage investments that have cost Wall Street banks so dearly. But because hedge funds are private firms, their losses are not generally visible to the public. ...

He said he had personally lost more than $150 million.
Happy 38th birthday, Mr. Devaney!

1 comment:

  1. He said he had personally lost more than $150 million.....did he say how much he made when he was earning 20% of the profits????

    too bad for him. boo hoo.he only has 200 mill left.

    dow 7200!!!