Hedge Funds Cash In on Collapse of Bear

Wagering the securities firm stock would fall paid off millions
By Jim O'Neill,  Newser Staff
Posted Mar 20, 2008 9:25 AM CDT
Hedge Funds Cash In on Collapse of Bear
The headquarters for JP Morgan Chase, right, and Bear Stearns, left, are shown on Monday, March 17, 2008 in New York.   (AP Photo/Mark Lennihan)

The epic collapse of Bear Stearns didn't mean bad news for everyone on Wall Street—several big hedge funds made a mint off it, the Wall Street Journal reports. The funds essentially placed bets that Bear would stumble, then raked in millions when the security firm's shares took a nosedive. The SEC is investigating to make sure profiteers did not have insider knowledge of the coming collapse.

Most of the profits came through a process known as short-selling, and about 25% of Bear Stearns shares were sold that way—the seventh-most of any S&P 500 issue. Some of the big winners, including Harbinger, Greenlight, and Tremblant, had as long ago as last summer began placing their bets. A Tremblant investor said the firm had no special knowledge about Bear but began looking last year for "an insurance trade in case the world got ugly." (More Bear Stearns stories.)

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