Everest Macro Hedge Fund Blows Up After Nearly $1 BIllion In Swiss Franc Losses

Tyler Durden's picture

Yesterday, when we got the first news of huge P&L losses at various publicly-traded banks not to mention the collapse of several retail brokers culminating with the bailout of FXCM by Jefferies, we reminded that seconds after the SNB shocker, we tweeted what was quite obvious to anyone who realized that speculators were most short the CHF since the summer of 2013:

We also added that "We have yet to find out just which hedge funds were blown up yesterday", for the simple reason that unlike public banks who have an obligation to reveal news, especially bad, to their shareholders, hedge funds PMs hope to avoid the LP firing squad until the last second. Alas, there is only so long that the day of reckoning can be delayed. 

One such fund is the Everest Capital Global macro fund, which went from just shy of a billion to zero in milliseconds as a result of a near wipe out due to a massive CHF-short position. Bloomberg reports:

Marko Dimitrijevic, the hedge fund manager who survived at least five emerging market debt crises, is closing his largest hedge fund after losing virtually all its money this week when the Swiss National Bank unexpectedly let the franc trade freely against the euro, according to a person familiar with the firm.

 

Everest Capital’s Global Fund had about $830 million in assets as of the end of December, according to a client report. The Miami-based firm, which specializes in emerging markets, still manages seven funds with about $2.2 billion in assets. The global fund, the firm’s oldest, was betting the Swiss franc would decline, said the person, who asked not to be named because the information is private.

 

Everest grew to $2.7 billion by the start of 1998 after navigating crises in Mexico and Southeast Asia. Russia’s default and currency devaluation proved trickier and assets fell by half amid losses. He revived the firm and a decade later Everest managed $3 billion. Then the global financial crisis hit, and assets shrunk by $1 billion.

 

Last year, the main fund rose 14.1 percent, driven by Chinese equities and bets against currencies, including a wager that the Swiss franc would fall after citizens rejected a referendum that would require the central bank to hold at least 20 percent of its assets in gold, the investor report said.

In other words, Dimitrijevic survived the vagaries of extremely volatile markets for over 15 years, and even flourished, yet all it took to destroy him was one decision by a conference room full of central-planners who were confident they knew better than the market for the second time in 3.5 years. Ironic.

One thing is certain: it is not just the former Yugoslav who feels as if he has fallen off the top of Everest this weekend, many other funds are too. Here is who else has been named so far according to the WSJ:

Other hedge funds that have suffered amid the Swiss turmoil, according to people familiar with the situation, are Discovery Capital Management LLC, a South Norwalk, Conn. firm that manages $14.7 billion, and Comac Capital LLP, which oversees $1.2 billion in London.

Expect to learn of more casualties from the historic move in the coming days, and certainly once other banks follow in the footsteps of the Swiss central bank, and like the Pied Piper, lead all those "sophisticated investors" who were merely frontrunning and trading alongside central banks on massive leverage pretending they were generating alpha, right off the edge of the cliff.

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Kokulakai's picture

We free marketed some folks.

Stackers's picture

Always remember this is a zero sum game. Those losses became someone else's profits ......

kaiserhoff's picture

Yes it is, so where are the winners?  Usually after a big move, there are a few fools strutting around like they just won the super bowl.

It's way too quiet out there.  This is friggin spooky.

El Vaquero's picture

It's a weekend.  Let us see what shakes out next week.  If nothing, then, yeah, spooky.  

kaiserhoff's picture

There may be enough of a domino effect among FX firms,

  that they are having trouble paying the winners.

Publicus's picture

The Swiss people are the winners here, you won't be hearing from them that is for sure.

Vampyroteuthis infernalis's picture

Disagree about the winners when all the players are leveraged 10X. Everyone will lose in the end with rolling defaults.

sun tzu's picture

That could be true but the taxpayers bailed out AIG and made Goldman Ballsacks good.

Never One Roach's picture

"Dimitri could not be reached for comment."

Urban Redneck's picture

We know one party who certainly knew (SNB), and a whole bunch of the usual suspects who apparently didn't know (e.g. IMF, GS, ShittiBank).  Seems to me the Swiss FI's have been paying more than their "fair share" to Uncle Sam's extortion racket... while US domiciled FI's have gotten a free pass from the human lawn jockey/Attorney General...  

(but that would be very un-Swiss)

Element's picture

 

 

"Place your bets Gentlemen!"

"Yup, think I'll let mine ride on Red 17 again."

 

 

 

 

Losses are always someone else's error.

FlacoGee's picture

Winners: Cross border workers.   Italian, German, and French citizens who cross daily into Switzerland for large salaries that were articifically low for 3 years.

Winners: Swiss citizens with savings

Winners: Those who got fucked when the SNB put the floor in place.  This applies to the above, but also those who were holding CHF as a defensive play.   The CHF was having a great year when the SNB put the floor in place...   Vaporized.

 

The above winners don't have PR depts.

 

 

trulz4lulz's picture

Is it bad that Im more excited for Monday Markets than I am or ever will be for nfl games tomorrow?

I had a dream once about a poker game. The game was being played by who appeared to be very important people. There were 8 or 10 people max. But the number of folks playing wasnt the focal point, that was the silver tray being held by the dealers bank. You see, on this tray each player could take a "chip" from this tiny black dot in the center of the tray. At first everyone went hog wild taking from the silver platter, filling thier coffers and increasing their bets. Eventually I noticed that the black dot on the silver tray was increasing in size.

Eventually it came to be a giant void of 3 dimensional debt. However it came to be that no one who was playing poker could help themselves from it, everyone needed more, always. The void of solid abscence gave endlessly to the greedy, self absorbed gamblers, entirely oblivious to oblivion.

BeanusCountus's picture

I had the same dream. Came after reading the minutes of a meeting of the federal reserve under the Bernank.

Right with you on Monday/Tuesday. I dont have any more info than anyone else, less in fact as I get some of it from the knowledgeable folks on this site, but I have this really bad vibe about what will come out over next couple days. The guy who said "spooky" about this calm from Swiss stuff is interesting.

Sutton's picture

Wild guess-the winners are UBS and Credit Suisse.

DebtTheNewEquity's picture

Not with leverage, large losses destroy credit... which today is money.

effendi's picture

It isn't a zerosum game. It costs serious money to run all those trading desks. There is also the cost in terms of economic contraction, loss of confidence and the costs of bankruptcies, failed counterparty obligations and human destruction (how many suicides, marriage failures and abortions will result from this).

cifo's picture

especially abortions...

francis_the_wonder_hamster's picture

The following email was sent by Everest Capital to one of my clients on Friday:

Subject: Update to Our Investors Following yesterday’s unprecedented movement in the Swiss Franc, in particular against the Euro, the Everest Capital Global Fund experienced very significant losses such that there may be little or no recovery for the Fund’s investors.  We are currently evaluating the ramifications to this specific Fund and are working on resolving the Fund’s liabilities.   The Everest Capital Emerging Markets, Global Emerging Equity, Emerging Equity Focus, Frontier Markets, Frontier Markets Equity and Asia funds had little or no exposure to the investment in question and through yesterday are in line or ahead of global equity markets for the month. Please feel free to contact us if you have any questions.     This communication and any attachments hereto is confidential and is intended solely for the addressee. If you are not the intended recipient, any disclosure, copying, distribution or any action taken or omitted to be taken in reliance on it, is prohibited and may be unlawful. Electronic communication cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost or destroyed. Everest Capital does not accept liability for any errors or omission in the contents of this message. This communication shall not constitute an offer of interests in any fund, which may only be made pursuant to the confidential offering memorandum, related subscription agreement and applicable laws and regulations.
francis_the_wonder_hamster's picture

Sorry for the lack of spacing.  I just pasted it directly from Outlook.

ebworthen's picture

"$830 Million on double sixes at 30 to 1 odds please Croupier."

DOH!  Thank you SNB!!!

souljaboy's picture

No doubt many of these fine people were advised of the developments while on posh ski vacatons. Hilarious. Well, at least the lawyers will make out pretty good.

trader1's picture

the world doesn't end when you lose all your money.

El Vaquero's picture

But it does end when you hit the ground after jumping out of a window because you lost all your money.

cifo's picture

What one needs for fighting is skills. Lose the fight, you still have your skills.

Money is what you need for trading. No money, no trading.

 

NoDebt's picture

Bankers have a somewhat different view of "the world" than you and I.

kaiserhoff's picture

True, but it's no great honor, either.

Alpacanio's picture

It ends when you lose your food and water.

GMadScientist's picture

Or that stuff pumping through your veins.

Amish Hacker's picture

You mean, your world doesn't end when you lose all your clients' money.

max2205's picture

Obviously performance  don't mean shit on a hedge fund managers resume.

yogibear's picture

:"the world doesn't end when you lose all your money."

It does end when you piss off a nuclear armed country like Russia and you back them in the corner.

Like the US is doing.

disabledvet's picture

"No dollar Monday" coming up.

Come 9:30 AM Tuesday "all will be well again."

Miami might have a few problems..."they handle that upstairs.  Room 243, floor 97 I believe."

hairball48's picture

Well that'll teach em' won't it?!!

oops, did I say that?

Caveman93's picture

My old man told me years ago, "When your number is up...it's up."

Greenspazm's picture

They were evidently... levverred up... to the yingyang....

Winston Churchill's picture

Ying yang , that a new currency pair ?

Ward cleaver's picture

Absolutely , and where'd they get the money, from
the banks so they lose....too bad, maybe gov will
make them whole

eeaton's picture

 

so who was long? Made a fortune!

downwiththebanks's picture

I made $13 on a $5 bet against Yen.  #StillCountin

Flagit's picture

What effect will this Swiss Miss have on the hot chocolate industry!!??

 

I see June and July shawclate' futures really melting up : /

yogibear's picture

Good! Serves them right.

It's what happens when you lever-up and become a pig.

Pigs get slaughted.

 

 

JustObserving's picture

Swiss National Bank has about 500 billion Euros and the Euro at one time dropped 39%.  So that was a loss of nearly 200 billion Euros or a loss of $230 billion in a few hours.  Luckily the decline now is only 16% or 80 billion Euros or about $100 billion.  And the Swiss stock market has also declined about 14%.  With the Swiss stock market worth about a trillion, Switzerland has lost $140 billion in stock market wealth. So about $240 billion in wealth just evaporated in two days.  That would be like the US losing over $5 trillion in wealth in just 2 days.

Is the Swiss National Bank bankrupt due to its losses of about $100 billion? Or it just conjures up more Swiss francs?

 

Publicus's picture

LOL, the Swiss elite got those Euro for free. Or rather, they stole the purchase power/net worth of the Swiss people and got for themselves those Euros by printing the Swiss currency.

There is no loss for the elite. The Swiss people got screwed in both directions.

The people are rising up and are going to hang the elites.

FlacoGee's picture

Yeah, but the SNB's Greek bond holdings are paying 10% :)   Surely they will offset the currency losses with the guaranteed coupon payment... 

wewillwin's picture

This is supposed to be a HEDGE FUND which mean its protfolio should be HEDGED so it loose a bit when things go wrong not blow up!!!! i can't beleive it that people still trust crooks that don't know what they r doing in with their money!!!

Batman11's picture

I better dig out my book "The Death of Money".

I am sure one of his predictions for the end of days was chronic instability/volatility.

Crude, Venezuela, Russia, Ruble, the Middle East, China teetering, Japan desperate, the Euro shambles, US stock market at 1929 highs .....

Even the boring Swiss have become unstable.

 

The end is nigh.