got stop loss?
apparently not.
iht.com
Hedge fund liquidated after steep fall
Katherine Burton and Yukiko Takai Bloomberg News Monday, January 27, 2003
NEW YORK Eifuku Investment Management Ltd. has liquidated its $200 million Tokyo-based hedge fund after it dropped by 98 percent over seven days.
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Eifuku Master Fund lost money on stock trades between Jan. 6 and Jan. 15, said John Koonmen, a former Lehman Brothers Holdings Inc. trader who founded the fund in 1999, in a 14-paragraph letter to investors.
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"Things got off to a bad start immediately in 2003" with trading losses consuming almost all the fund's capital, Koonmen said in the Jan. 15 letter, which didn't identify the money-losing positions. He declined to comment when contacted Friday in Tokyo.
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It was the largest dollar loss by a Japanese hedge fund since John Zwaanstra, who ran the Penta Japan Fund Ltd., lost about half his assets in 2000. At its peak, Penta had about $1.3 billion.
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Eifuku had $80 million in holdings and $117 million in short sales as of Jan. 15, the letter said. A short sale involves an investor selling a security he or she doesn't own, hoping to buy it back later at a lower price. Eifuku, which means "eternal luck" in Japanese, plunged as positions in four Japanese bank stocks, a Japanese technology company and other holdings failed, according to Koonmen's letter. "This is a wake-up call for investors in hedge funds," said Ferenc Sanderson, president of Sanderson Consulting of New York, which specializes in Japanese hedge funds. "You need proper due diligence of the fund and fund managers, and you have to know what kind of trading rewards and risks are involved."
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Koonmen's operations have always been secretive and mysterious, investors in Japanese hedge funds said. His office in Japan was listed under the name of two technology companies, first Blue-Edge Technologies and later Central Technologies Japan.
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After losses of about 15 percent on Jan. 6 and Jan. 7, 15 percent on Jan. 8 and 16 percent Jan. 9, Koonmen's fund was "severely under margin," the letter said. It was then that Goldman Sachs Group Inc., the fund's main broker, decided to liquidate the fund, according to the letter, which was confirmed by Goldman.
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The Eifuku fund lost another 12 percent on Jan. 10 as Goldman unwound some of Eifuku's positions, leaving the fund with a 58 percent loss for the week, the letter said.
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On Jan. 14, Goldman arranged block trades to close Koonmen's two largest positions - a Japanese technology stock holding and a so-called "stub" trade in which the manager bought shares of a parent company and sold short stock in a 63-percent owned subsidiary, the letter said. The stub trade was in mobile phone company NTT DoCoMo Inc. and its parent NTT Corp.
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Those trades left the fund with a 40 percent loss that day and, by the end of Jan. 15, the fund had about 2 percent of the capital with which it started 2003, the letter said.
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The fund invested in a Japanese technology stock, which had been "excessively sold off in the last quarter of the year," the letter said.
Management Ltd. has liquidated its $200 million Tokyo-based hedge fund after it dropped by 98 percent over seven days.
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