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Head Of Recently Shuttered "World's Largest FX Hedge Fund" On Hook For Firm's Debt
It's been a tough year for John Taylor - cursed by the CNBC Squawk Master monicker - but it appears to be getting worse. As Hedge Fund Alert reports, less than a year before his currency-trading shop filed for bankruptcy, the FX Concepts founder personally guaranteed a chunk of the debt his firm owes to its largest creditor. AMF, the Credit Suisse hedge fund incubator, is owed $34.4 million with Taylor on the hook for $5 million and "is going to clearly try to get the money out of John," but, "by any stretch of the imagination, it's not there." Recent court documents suggest the fund was in even worse shape than previously understood as the liquidation of FX Concepts' four main assets is ongoing but as a whole, however, the trading programs probably are worth little, one source said. “If their models worked, they would have produced returns,” he said. “Their brand has no value, unless you want to advertise negative returns.”
Less than a year before his currency-trading shop filed for bankruptcy, FX Concepts founder John Taylor personally guaranteed a chunk of the debt his firm owes to its largest creditor.
Asset Management Finance, a Credit Suisse unit that has invested in a number of prominent hedge fund-management firms in the past decade, provided $40 million of debt financing to FX Concepts via two revenue-sharing agreements in 2006 and 2010. But in December 2012, as opportunities in the currency market continued to fade and redemptions mounted, Taylor was forced to renegotiate the financing package. The Credit Suisse unit agreed to defer eight quarterly revenue-sharing payments in exchange for Taylor’s personal guarantee for those obligations. As of Oct. 17, when the firm filed for Chapter 11, FX Concepts owed Asset Management Finance $34.4 million, with Taylor on the hook for $5 million of the total.
“AMF is going to clearly try to get money out of John,” a source said. “By any stretch of the imagination, it’s not there.”
...
The liquidation of FX Concepts’ assets is being handled by restructuring specialist CDG Group, which has begun reaching out to some 40 other currency managers, as well as to current and former FX Concepts executives. On the block are four assets: trading technology encompassing 148 distinct programs; a database covering 30-plus years of currency prices and other historical data; a daily newsletter that Taylor has published since 1981; and the FX Concepts trademark. Among the trading programs is the firm’s flagship Global Currency Program, which was down 13.9% this year through August. Other programs have been more profitable — with one automated-trading model generating a 50% gain through September.
As a whole, however, the trading programs probably are worth little, one source said. “If their models worked, they would have produced returns,” he said. “Their brand has no value, unless you want to advertise negative returns.”
...
What’s known is that the proceeds of the 2010 financing package were paid out to Taylor as an advance on his equity in the business. He used the money to buy his condo, reportedly paying $22 million — or $4.5 million more than the asking price. At the same time, Taylor has spent significant amounts of his own money funding research into hemophilia, which afflicts one of his children.
Sadly, it seems once again that the inverse correlation between hedge fund performance and frequency of appearance on CNBC has proved itself...
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Another former expert who is by now convinced that his assumption that there was a free market, was incorrect. At least he did not steal his clients money to pay off CS the way Corzine stole his clients money to pay off JPM. In that way, I have some respect for Taylor, even though his theories seem to be simple B/S... negative rates indeed!
There is no market there is only the bernak.
and his ivy league club members...
Wait, someone actually put their own assets at risk in this ponzi?
Adios, MFer!
Too bad this dude didn't own a bank, or manage a bank that is part of the Feral Reserve. He'd be bailed out monthly and then be allowed to go on CNBS and say things like "we've never been stronger. Our share prices are up 300% from the crisis in '08. We are on solid ground."
Then someone on here, perhaps me, would call them out for being broke and insolvent and be labeled a conspiracy nut.
See how a financial democracy works? S'all good.....
EDIT: Larry Summers is a moron. Is it any wonder our country is so stupid? Summers is a college professor... lmao!!!! The dumb teaching the influential, producing graduating dummies. FU Larry, you inept POS. Brooksley Borne owns you.
A bullet to the back of the head, retrieved and sent to surviving family members would solve the bankster dilemma real quick.
And like in the bad old days of the USSR, the family had to pay for the bullet.
Taylor is a decent guy. This is pretty sad.
5mil is chump change.
This chump seems not to have it. But he's got working organs. Extract a pound or two of flesh from this shit eater and sell it on the Chinese black market.
I'll believe it when I see it (the management and owners use their own wealth to pay off the creditors of their failed company). Certainly this asshat has a politician in his pocket to help preserve his stolen wealth and socialize those losses.
roll the motherfucking guillotines.
nothing changes otherwise.
i thought the FED was the largest FX hedge fund?
The FED is largest Distressed Debt Fund in the world, they actually have very little FX.
my bad. i thought for a second that they owned 99.9999% of treasuries.
He better hope his car doesn't have one of those special self ejecting engines.
FX funds worked on the assumption that there is a 'short' and a riskless asset. When everything is riskless, top down speculation becomes a mugs game. The same tragedy that hit Taylor has screwed Moore to a lesser degree, which was the same symptoms that led most to exit the long tail trades of the JPY in 1993 following the Waldorf Accord drama.
What is your long when all currencies are debasing ? Are you going to go USD when everything retraces every 40 days on 'taper' or POMO chatter on 2x leverage net ? nope. Goldbugs wonder why the gold equities have fallen out ? Its simple, why invest in a mine when your risk model assumes gold will be either 14,000 or 500.00 in 2020 ? No reason to buy equity, then no reason to hedge forward or buy paper to cover your forward production.
Its same problem in the energy market right now. Why do you think Glencore is moving to forward contract speculating, nothing matters beyond the 4-year outlook because either 1.) Asset prices are going to go full retard or 2.) Asset prices are going full retard down. Either way your option model risk model will REF at trying to find a logical option price when the swing is 90% vol each way. What is the point of even assuming a currency will remain in a fixed ratio 5 years from now when a fed can simply snap triple the money supply in 3 sessions.
What is your hedge going to be for that amount of vol ? Are you going to price in RNB ? No multivariate model can estimate the reaction functions of 6 major CB's all debasing at once. It's all become simple day trading MOMO on Kremlinology in EUD vs. JPY vs. RNB. T Your estimates are no better right now using all the math of the cold war than a white noise ARMA process.
As Fink said a few weeks ago, the whole system was never designed to operate in a world where assets are all inferior to each other and everything is transatory towards an unknown exit date. It's a XIRR function with no end, and no fixed rate of growth. In short, a dead end problem.
The larger problem is that when the money markets and macro currency funds drop out, the swings get wider because nobody is there to hold or sop up liquidity. So the big question becomes, who is fucking the net buyer in these conduits and crosses ? Is it still sterilized printing when open market desks are essentially trading swaps with each other just to keep the FOREX working ? You want to see some fun shit ? Lets see what happens when Iran suddenly wants to pay off their 5 years of current account shortfall with a few billion barrels of shut in production. Want to guess what happens to the 'growth' and inflation projections for the ECB when the floor falls out on a Brent 66/bbl market ? Any idea what that will look like to Joe Q who's jobs at the oil fields, refineries, chemical plants & midstream (the only net additions to the ZIRP economy) or those fabulous 'green tech' pump & dumps ?
If Yellen does go full retard and decides to go buy another 20% of the 10y market, what is the point of pricing oil or any real asset for that matter? Passthroughs to a dead retail consumer are not going to make the rate of inflation anyways. Check out Loblaw's today or WMT tonight. EBT is not inflationary, it's deflationary in nature due to the fixed cap on discretionary ticket items. Joe Q may be allowed to buy 4 lobster dinners but those rock lobsters would have been 1 lobster, some socks, a text book and a fitness plan if Joe Q had a salary. Which had more multiple expansion, the subsidized crustian grow op OR the consumer discretionary tickets ?
If the micro detailings are all messed up, how the hell can a macro fund make a reading on outlook. This lack of confidence in long-term currency exposure trickles down to the microeconomy funds who use that speculation capital to direct sector exposures and regional investment themes.
Well said!
His models actually worked well when shit wasn't in a race to debase.
What’s known is that the proceeds of the 2010 financing package were paid out to Taylor as an advance on his equity in the business. He used the money to buy his condo...
Typical me-first insider scumbag. Suck it Credit Suisse. Suck it long, suck it hard.
Betting on currencies is a fools game.
Actually sucker investor lists are worth a ton of money, I bet many of the Madoff investors have been rooked again buying "safe insured A rated investments" and they don't even know it.
Funny story about one of these scum having a fist fight at a "holiday party" over losses with Madoff.
http://www.businessinsider.com/2008/12/superrich-madoff-investors-fight-...
Jerome Fisher loses $20 million with KL which was Korean brother day traders in Palm Beach. Then he loses $150 million with Bernie. Greedy stupid jerk.
http://longorshortcapital.com/fool-him-twice-jerome-fisher.htm
http://www.nytimes.com/2005/08/14/business/yourmoney/14hedge.html?pagewa...
The day trading Korean brothers were real clowns.