Wednesday, January 21, 2009

Perry Capital Was in Volkswagen Short Bandwagon; Now is in Corporate Credit Bandwagon

In his 2008 self evaluation letter, Richard Perry notes all the mistakes that the markets did last year in not agreeing with his assessment of what sound investments are. Notable among them is the short squeeze in Volkswagen shares, which the 1 Sutton Place resident attributes as the main cause to his -26.8% performance in 2008. As every single hedge fund and their grandmother was in this trade, it is good to see that contrarianism is not one of the reasons Perry notes for his downfall.

In terms of current investments, the fund has invested 29% of the Perry money in credit: 78% of this is in stressed credit at 50% of par, and the balance is in mortgage credit also at 50% of par... "There is ample room for price appreciation on the credit investments" is the justification given... Well seeing how every other hedge fund is in this trade again, there is ample room for depreciation as well, we would add. And, also, Mr. Perry "investing prematurely on an unhedged basis" is not why you pocket 2/20... Just saying Sphere: Related Content
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