Photo: Fox Business News
One contributing factor to JP Morgan’s $2 billion trading loss was the fact that their positions were essentially revealed by the media when stories about the “London Whale” with his huge CDS position were published. Since then, traders have had the opportunity to take the opposite side of JP Morgan’s large and risky trade to possibly make a profit.Now, the Wall Street Journal’s Gregory Zuckerman is reporting that two hedge funds which made money off that trade are BlueMountain Capital and BlueCrest Capital. Both funds made up to $30 million off JP Morgan’s blunder, according to the WSJ.
Ironically, both BlueMountain Capital and BlueCrest Capital have employees that are famous alums of JP Morgan. BlueMountain was co-founded by Andrew Feldstein, who spent eleven years at JP Morgan as a member of its credit derivative team. BlueCrest has Leda Braga, one of the most famous female portfolio managers in the world, who also used to work at JP Morgan.
Traders at hedge fund said that they took advantage of a “market out of whack,” but they weren’t betting on JP Morgan failing. From the WSJ:
Some traders decided to take the other side of J.P. Morgan’s trades — including those of a London-based trader at the bank nicknamed “the London Whale” — in the belief that the bank’s positions had become so large they would have to be sold at some point, perhaps due to pressure from senior executives, said people familiar with the matter.
Others entered into opposing trades simply because J.P. Morgan had made so many wagers on corporate credit, by selling so-called credit-default insurance, that it became inexpensive for these other traders to buy this insurance to protect against bad economic news.