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Soros, Druckenmiller among hedgies profiting in market plunge

Fang submitted 2016-06-25 22:27:56

Bullish positions in gold and volatility and well-timed short bets on China and emerging markets, among other areas, were some of the trades that benefited hedge funds on Friday as markets digested Britons' surprise decision to exit the European Union, according to people familiar with the matter.

Saba Capital, the credit hedge fund in New York, and a flagship fund at the London investment firm Odey Asset Management were two beneficiaries of the "leave" victory in the U.K. overnight, according to these people. And so-called "macro" fund managers George Soros andStanley Druckenmiller, who run private firms managing family money through investments in a range of assets, appeared to be benefiting from long positions in gold, according to filings, though their overall performance numbers weren't clear.

Saba, run by the fund manager Boaz Weinstein, was up primarily on positions that benefited from volatility — a combination of holdings that included equity put options in Europe and Asia and credit-default swaps, or insurance policies on debtors unable to pay off their debts, one of these people said.

With nearly 13 percent upside through the end of May, Saba is one of the better performing hedge funds this year, according to an industry poll conducted weekly by HSBC.

At the same time, Odey Asset Management, which runs a variety of funds, was up 15 percent in its flagship fund by the close of European markets on Friday, according to people familiar with the matter. (Nonetheless, with declines of more than 26 percent through mid-June, according to HSBC, in its European fund, Odey has been home to some of the worst performance numbers so far this year.)

Odey, which manages about $10 billion, is headed by Crispin Odey, an outspoken advocate for Britain's exit from the EU who according to sources familiar with the matter commissioned private polls to get an early gauge on the potential outcome of Thursday's referendum vote.

George Soros
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George Soros

His firm's flagship fund benefited, however, from various short positions put on many months before Britons went to the polls, including bearish bets on China, emerging markets, material and cyclical stocks, luxury stocks, and a number of currencies, according to people familiar with the matter. Odey's fund was also bullish on gold, these people added.

"Ordinary people have spoken and broken ranks with the experts and their political leaders," Odey said in an e-mailed statement on Friday. "This reflects proper disaffection in a world of low growth and almost no productivity growth, which can only get worse if unanswered. This is a black day for those who would prefer decisions to be made in darkened rooms by experts. What a day. But it must not go to waste and we must remember how close it was but also how brave a decision it was!"

A spokesman for Saba declined to comment on specific performance figures.

Elsewhere in the market, a stunning 4.5 percent jump in the price of gold created paper profits for Soros and Druckenmiller, both of whom held bullish positions in the yellow metal, according to recent regulatory filings.

Ahead of the referendum Soros, who runs the $30 billion Soros Fund Management and recently took a more active role in the company's trading, argued passionately for Britons to stay in the EU.

"Too many people believe that a vote to leave the EU will have no effect on their personal financial position,"Soros wrote in an op-ed piecepublished by the Guardian newspaper earlier this week. "This is wishful thinking."

He added that in the wake of an exit vote, the British pound would fall precipitously — as it did Friday — and that there would be "an immediate and dramatic impact on financial markets, investment, prices, and jobs." Whether Soros's portfolio was positioned specifically to benefit from a British exit of the EU, however, through a long bet in the pound or other means, was never clear.

Notwithstanding that, some of Soros Fund Management's positions seemed to be rallying on Friday.

Its holdings in the miner Barrick Gold, its top stock position, and in theSPDR Gold Trust, an exchange-traded fund tracking the commodity were both up markedly. Put options he recently held in the S&P 500would also appear to have benefited from a roughly 3 percent drop as of Friday afternoon.

At the same time, Soros holdings in European equities like the real-estate company Kennedy-Wilson were notably down. A spokesman for Soros declined in an email Friday to comment on the fund's positions or performance.

Druckenmiller, a well-known macro manager who runs Duquesne Family Office, owns a variety of tech and other equities in his portfolio, but also has a considerable position in call options on a gold ETF, recent filings state.

At an investment conference in early May where he decried the Federal Reserve's post-recession monetary policies and expressed deep concern about the economy, he touted gold, without naming it. "It has traded for 5,000 years and for the first time has a positive carry in many parts of the globe," he said. "Some regard it as a metal, we regard it as a currency and it remains our largest currency allocation."

Druckenmiller declined to comment on Brexit in an e-mailed statement yesterday, but said that his views on gold had not changed.

—CNBC's Wilfred Frost contributed to this report.

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