UK Hedge Fund That Suffered Losses From Betting Against GameStop (GME) Shuts Down: Report
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White Square Capital, a London-based hedge fund, has reportedly shut down its main fund and returned capital to investors, the Financial Times reports today.
White Square, which is run by former Paulson & Co trader Florian Kronawitter, managed about $440 million in assets. Its bets against GameStop (NYSE: GME) were costly as the internal review of the company’s business model didn’t yield positive results.
It is reported that White Square suffered double-digit percent losses earlier this year from betting against a popular meme stock.
“The decision to close down is related to thinking the equity long-short model is challenged,” Kronawitter is quoted by the Financial Times.
“There are way too many fish in the pond with the same strategy of long-short. The traditional edge is being arbed away [eroded by other investors], there’s an oversupply of capital.”
Although it suffered big losses, the hedge fund performed decently since and it managed to recover “a fair share” of previous losses, the report adds. The hedge fund was up 19% last year after also making double-digit returns in 2015 and 2016.
“We experienced first-hand the shift in trend away from hedge fund investing to cheaper alternatives,” the hedge fund said in a letter.
“The arbitrage opportunities have diminished with both the onslaught of capital caused by central bank monetary interventions, as well as much improved dissemination of information, bringing up the question to what degree the same fees can be justified,” it added.
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