Soros braced for more losses

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The Independent Online
HEDGE FUNDS controlled by George Soros, the billionaire financier, remain exposed to millions of dollars of losses, according to people familiar with the funds' investment positions, writes Peter Koenig.

The exposure results from bets made in late August and early September that the US stock market was headed for further falls. Since 1 September, the Dow Jones industrial average has risen more than 1,000 points, or 13 per cent, from its low of 7,539.07. On Friday, it closed at 8,592.10.

"The positions were taken after [Stanley] Druckenmiller, [manager of Soros' flagship Quantum Fund], admitted on 26 August the group had lost $2bn [pounds 1.2bn] in Russia," said a banker familiar with the group. "The aim was to make up for this loss. But it looks like the bet has backfired."

Dismissing the banker's claims as "garbage", Soros spokesman Shawn Pattison noted that "in his 26 August statement, Mr Druckenmiller made bullish noises about the S&P [US stock market index]."

He did not, however, deny that the Soros funds were exposed via short positions in the US futures market.

The banker also claimed that, in addition to losses in Russia, the Soros group had lost $2bn in Hong Kong after it bet the Hong Kong stock market would fall and the Hong Kong Monetary Authority intervened to prop it up.

"The $2bn figure is wrong," Mr Pattison said, without responding to questions about whether smaller losses had been suffered in Hong Kong.

"People are saying the worst is over for the hedge funds," said one New York hedge fund manager specialising in currencies. "I don't think the worst is over."

The Soros group has acknowledged it is facing difficulties. In a 23 October letter to shareholders, Mr Soros told investors that Nicholas Roditi - the secretive, Zimbabwe-born fund manager based in London - was "taking a temporary medical leave of absence". Mr Soros's Quota Fund, which is managed by Mr Roditi, earned a 50 per cent return last year, but is 14 per cent down this year.

"This cannot go on forever," said one hedge fund manager. The whole hedge fund situation still seems to me like a fragile house of cards."

The real Soros, main section, page 23