Odey and hedge funds hit by JP Morgan Chase loss

A group of hedge funds, including those run by Odey Asset Management, had a combined $1bn invested in JP Morgan Chase which suffered a near 10% drop in its share price on Friday.

According to UK newspaper the Telegraph, the badly-hit group also included Sir Paul Ruddock’s Lansdowne Partners and Pierre Lagrange’s GLG.

Shares in JP Morgan Chase fell by 9.4% on Friday as investors reacted to news the bank’s chief investment office had suffered $2bn of losses as a result of risky derivative trades and hedges. In total, $14.4bn was wiped off the bank’s value.

Prior to the loss announcement, JP Morgan traded at a premium to peers and also its book value. Following the announcement, its credit rating has now been cut one notch by Fitch, while S&P lowered the bank’s outlook to ‘negative’ from ‘stable’.

“The ratings of shares will suffer, and now we are anticipating regulatory comeback that will likely hurt JP Morgan and the entire sector,” a shareholder in the bank told the Telegraph.

Lansdowne Partners had more than 12% of its mega-fund invested in JP Morgan, the paper reports, making it a top 15 shareholder. According to the latest Securities and Exchange Commission filings, the hedge fund owns 25 million shares in JP Morgan, which at the beginning of last week was valued at more than $1bn. By Friday it was worth less than $924m.

Crispin Odey’s (pictured) $1.3bn European equity fund also bet heavily on JP Morgan. Odey’s $96m holding at the start of the week made JP Morgan one of his biggest US bank investments, though within Odey Asset Management Group no fund has more than a 2% holding in the company. It lost almost $10m overnight on news of the losses.

In a recent letter to investors, Odey had praised the US banking sector: “Whilst locals in the USA are reasonably cautious about their own economic future, through European eyes, America has achieved the perfect prize – profitable banking and affordable housing.”

Meanwhile, GLG, part of Man Group, had almost $25m invested in JP Morgan at the start of last week according to US filings. This dropped to around $20m after the announcement.

Hedge funds outside the UK have also been hit by the bank’s losses. According to US regulatory filings they include Highfields Capital, with 9.35m shares; Maverick Capital 8.37m shares; Ruffer LLP which has 6.57m shares and Adage Capital Partners with 6.11m shares.


This article was first published on Investment Week

Close Window
View the Magazine

I also agree to receive editorial emails from InvestmentEurope
I also agree to receive event communications for InvestmentEurope
I also agree to receive other communications emails from InvestmentEurope
I agree to the terms of service *

You need to fill all required fields!