World Economic News

Hedge Funds Take Big Hit on Currency Trading

A number of big hedge funds suffered huge losses in March and May this year, when emerging market currencies were crashing, the London Financial Times reported Aug. 1. The same funds then changed their strategy in June, speculating on a further fall of such currencies, exactly at the moment when emerging market currencies suddenly rebounded. Some funds thereby lost 20% or more of their entire capital.

"Times are tough for the majority of the hedge funds specialising in the currency markets," the FT noted. "After suffering probably their worst year for a decade in 2005, a number of large, high-profile funds have chalked up further losses this year. The three currency hedge funds operated by John W. Henry, a noted U.S. manager, have all lost between 10.3% and 21.5% this year, while the AHL Currency Fund run by the UK's Man Group lost 9.8% in the first half. Elsewhere, the $5.3 billion FX Concepts Developed Market Currency Program has lost 7.7% this year, Sunrise Capital Management's $116 million Currency Program has dropped 8% and the $5.3 million First Southeastern Capital Management's Currency Program is down 18.7%, according to the industry website Autumn Gold."

A BNP Paribas trader is quoted, saying: "They did not get the change in emerging market currencies in advance in March and May. Then when these currencies declined they assumed this would continue and bet on the wrong direction once again."

Banks Investigated in Israeli Money Laundering

Daniel Bouton, CEO of Société Générale, and 136 other officials of his own bank, as well as of Barclay's Bank, and Société Marseillaise de Crédit, are targets of an investigation that expects to explore a big money-laundering deal involving Israeli bankers, as well. Also the National Bank of Pakistan is involved in the affair.