Saturday, 2 August 2014
Last updated 14 hours ago
Jan 31 2008 | 8:46am ET
Scion Capital is putting its faith in policymakers and corporate leaders to prevent “financial Armageddon.”
The $1 billion hedge fund is liquidating its Asian funds to focus on the opportunities created by U.S. economic troubles. According to a letter to investors, obtained by MarketWatch, the decision was not motivated by redemptions or any other problems—the funds have returned between 80% and 116% in their three years of life.
“The primary motivation for this move is that I foresee a significant opportunity to invest in dramatically undervalued distressed assets and out-of-favor businesses over the next several years,” Michael Burry, who runs the firm, wrote. “The sheer magnitude of the troubles facing the leading companies in what is still the world’s largest and most significant economy cannot be missed. The global credit bubble has burst, and the world has not yet learned the full impact.”
Scion’s value funds profited handsomely from the credit crisis and subprime mortgage market collapse, returning upwards of 130% last year. But the firm has drastically slashed its short bets, betting instead that the powers that be will do what it takes to revive the economy.
“The capacity of the American government, sovereign investment funds and large global companies to do so remains prodigious,” Burry wrote. “The pressure is immense on politicians, policymakers and corporate leaders globally to keep this from becoming a financial Armageddon.”
The firm plans to return the $200 million in its Asian funds beginning at the end of the first quarter. Investors will be given the opportunity to move the money into its main global funds.