Hedge Funds’ Greek Bets Prove Profitable

Mar 3 2010 | 5:34am ET

As the Greek government prepares to impose austerity measures to keep its economy afloat, hedge funds are growing fat on the country’s troubles.

Hedge funds have turned big profits shorting Greek debt and offering insurance to overexposed European banks, the Finance Times reports. A handful of big firms correctly anticipated that the banks would drive a wave of selling against Greece.

“There are a group of funds, perhaps three or four, that have played this as a huge sovereign basis trade, and made a lot,” a strategist at a top London hedge fund told the FT.

Hedge funds’ Greek positions have unleashed a new wave of recriminations against the industry in Europe and a Federal Reserve probe in the U.S.

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