When violent political winds blow, rather than be blown away as the lone voice of reason, it’s best to simply lie low.
Thus Europe’s largest hedge fund, Brevan Howard, is making it clear that they are lying down nice and flat:
Hedge fund Brevan Howard said in a note to investors that the trade in Eurozone government bonds is “exposed to a regulatory squeeze as occurred on short positions on financial stocks in 2008”, referring to the ban on short selling of financial stocks, which was imposed to allow banks to recover from the credit crunch. The note said the fund has closed out all of its positions on European sovereign debt.
They’re not alone:
The Financial Times also reports that Moore Capital and Paulson & Co have abandoned their short positions on Greek government debt, the country whose troubles (pictured) sparked the Euro’s decline in the first place.
Smart move, from a long-term survival perspective. Any big name with a reputation is best avoiding the negative P.R. involved here, which is likely to far outweigh one good year of performance, even if they think the certain euro bonds are toast.
Meanwhile, for the eurozone shorts that remain, risk and reward have now both intensified.