Hedge Funds Bet Big on the Falling Euro

Bloomberg News

Hedge funds, including Hayman Advisers and Matrix Group, have told investors that they expect the sovereign debt crisis to worsen despite the €110bn (£79bn) bail-out by the International Monetary Fund, the European Union and the European Central Bank.

Anxiety about the financial health of Europe increased yesterday after Spain’s national bank was forced to take control of CajaSur, a savings bank ridden with distressed property debt, after a rescue merger with a rival collapsed.

Traders and brokers told The Sunday Telegraph that hedge funds are using a range of financial instruments to bet that the value of the euro will fall. One trader said: “Shorting the euro is the biggest bet in town.

“We’re seeing big volumes in credit default swaps and short selling in equities that are exposed to the euro.”

Gennaro Pucci, manager at Matrix, which manages £3bn, generated 19pc returns last month in its €110m Global Credit Fund on bearish euro bets. Mr. Pucci told Bloomberg: “The ECB is buying debt at artificial levels, but that won’t solve structural problems.”

Nick Swenson, manager of US-based Groveland, who made millions of pounds during the credit crisis, said he started buying credit-default swaps on Spanish, Italian and Irish government bonds in March.

Source: The Sunday Telegraph > Click Link

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