One hedge fund has surged 36% this year by betting against cruise lines and airlines depleted by coronavirus
- Valiant Capital Management, a hedge fund led by Chris Hansen, has gained 36% year-to-date through the end of March, The Wall Street Journal's Juliet Chung reported Thursday.
- In the same timeframe, markets have been roiled by the coronavirus pandemic. The Dow Jones Industrial Average shed 23%, and the S&P 500 lost 20%.
- The fund profited on short bets it placed against cruise lines, international airlines, and travel companies, according to the report.
- Read more on Business Insider.
Amid a major market rout spurred by the coronavirus pandemic, one hedge fund has had outsized returns betting against companies hit hardest.
Valiant Capital Management led by Chris Hansen has gained 36% year-to-date through the end of March, before fees, The Wall Street Journal's Juliet Chung reported Thursday, citing people familiar with the firm. In the same timeframe, US stocks have tanked - the Dow Jones Industrial Average lost 23%, its worst first quarter ever. The S&P 500 lost about 20%.
The $1.4 billion fund was able to profit in the wreckage by placing strategic bets against leveraged companies that it saw being hit the hardest by the coronavirus outbreak. The hedge fund shorted stocks of cruise lines, international airlines, and travel companies, according to the report.
The returns are some of the best in the hedge-fund industry this year, according to The Journal. Hedge funds had been hurt by the longest-ever bull market, which ended when the coronavirus pandemic sent stocks tumbling in February.
Valiant also profited on credit protection bets it made in mid-February as the coronavirus crisis increased the likelihood of corporate defaults, The Journal reported. It closed half of its hedge a month later, according to the report.
The fund also cashed in on put options, which are contracts that allow the holder to sell shares at a specific price or date. Valiant had purchased cheap put options against indexes in the US and India, and bought additional put hedges starting in late January as concerns over the virus rose, The Journal reported.
The notional value of Valiant's options contracts were between $1 billion and $2 billion at their peaks, according to The Journal. That's roughly the same size as the fund's entire portfolio.
Read more: The stock-investing chief overseeing $485 billion for Schwab knows exactly how traders think. He offers 4 crucial tips for weathering the coronavirus storm - and outlines how to keep making money.
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