Hedge Fund’s Bet Against Spanish Banks Has Yet To Pay Off

Jun 12 2012 | 12:21pm ET

A hedge fund launched specifically to bet on Spain’s troubled banks has failed (so far) to profit from the crisis.

London-based Capula Investment launched the Capula Special Opportunities fund with $500 million but it hasn’t lived up to its hype, returning 1.9% in May and losing  3.8% year to date.

The fund bets on the price of credit default swaps. Spanish bank CDS prices have jumped in recent months, but the fund has yet to capitalize.

Capula pitched the situation as a “one-time opportunity” to a select group of institutional investors including the $50.8 billion Pennsylvania Public School Employees’ Retirement System, says Reuters citing a September board resolution recommending the pension invest up to $250 million in the fund which was targeting net returns of 50% to 70% while limiting the downside to just 10% per year.

Capula was founded in 2005 by Yan Huo, a former electrical engineer with a doctorate from Princeton, and ex-UFJ International's Masao Asai. Goldman Sachs' Petershill vehicle bought almost 20% of Capula in 2008.


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