This time, a hedge fund has been identified as the victim after the Swiss debacle. Many other financial institutions including banks and brokers have already announced their losses or declaring insolvency after the black Swiss Thursday.
According to Bloomberg, SNB's first hedge fund casualty goes to Everest Capital Global Fund. The fund reportedly lost a huge chunk of its capital after the SNB’s surprise announcement to scrap its three year old cap on the EURCHF. The firm will now be closed as said by Marko Dimitrijevic, Managing Member and Chief Investment Officer at Everest Capital LLC.
Everest Capital is one of many firms who thought betting on a decline of the CHF against the Euro was a safe position considering the Swiss national bank's grip on the currency pair. Unfortunately, the surprise announcement caused the firm to loose almost all its capital, as the fund is said to have had about $830 million in assets at the end of 2014, according to a client report cited by Bloomberg.
Everest Capital, a registered investment adviser with the U.S Securities & Exchange Commission based in Miami and Singapore specializes in emerging markets. The hedge fund operator still manages seven other funds with about $2.2 billion in assets, according to Bloomberg.
What Happened with Swiss Franc?!
AS the Swiss National Bank had announced three years ago its commitment to keep the EURCHF floor fixed at 1.20 zone, investors and traders saw it as a no risk income, everyone going long on Euro and short on CHF, benefiting minor upside movements as well as the positive interest rates on swaps as well. However three years long safe bet between the euro and the Swiss franc ended suddenly on Thursday, as the SNB scrapped the 1.20 floor. As soon as the SNB commitment was abandoned, the Swiss Franc smashed immediately higher, breaking through ceiling after ceiling. Just on EURCHF pair, the Franc gained nearly 28% or in another word EURCHF dropped nearly 40 Euro cent as the news broke.
Check out 5 trader lessons learnt from Swiss Franc last week.