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June 23, 2021

LOL: White Square Capital, One of the Hedge Funds That Bet Against GameStop (and Reddit), Shuts Down

Although they lost a lot of money trying to short GameStop, the Financial Times claims they recovered most of that in the ensuing months. And that their closure isn't due directly to their GameStop debacle, but due to a re-examination of their business model leading to a decision to stop operations.


But... it does seem that getting the stuffings kicked out of them by a group of financial Meme Lords has caused them to reexamine the selling long/selling short business they were engaged in.

White Square Capital, run by former Paulson & Co trader Florian Kronawitter, told investors that it would shut its main fund and return capital this month after a review of its business model, according to people familiar with the fund and a letter to investors.

White Square, which at its peak managed about $440m in assets, had bet against GameStop, say people familiar with its positioning, and suffered double-digit per cent losses in January.

The move marks one of the first closures of a hedge fund hit by the huge surges in so-called meme stocks....

"The decision to close down is related to thinking the equity long-short model is challenged," said Kronawitter.

"There are way too many fish in the pond with the same strategy of long-short," he added. "The traditional edge is being [arbitraged] away [eroded by other investors], there's an oversupply of capital."

That just sounds like Loser Talk to me.

A lot of other hedge funds lost a lot of money, including Melvin Capital.

They're not shutting down.

But who knows. Maybe they'll reexamine their business model, too.

Forests need to burn in order to grow. Maybe we need some more burning.

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posted by Ace at 12:16 PM

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