The Strategist

Who earned on Brexit?

06/27/2016 - 15:28

United Kingdom voted for Brexit, and this decision plunged markets into shock on Friday. However, a small group of hedge funds still managed to make a huge profit out of it.

jam_90s via flickr
jam_90s via flickr
This is especially noticeable given that many funds have bet with minimum risk with regard to customers.

"The unprecedentedly low number of incoming messages from clients and modest trading volumes indicate a lull in the run-up to the referendum in the UK", - said analysts of Credit Suisse then.

In addition, to bet between two possible options was quite a bold move. Four out of five hedge fund managers surveyed by Preqin expected that the UK would remain in the EU. Most experts suggested that the decision to stay would outweigh the decision to leave the European Union.

Several funds have got impressive gains. On Friday, profit of NuWave Matrix Fund rose by 12%, said the Fund’s Head Craig Weynand.

"It is true that Brexit is a result of the "either-or " selection, to go or stay, but history is replete with such examples. Historical events are not the same, of course, but they have much in common," - said Weynand.

Another fund Quadratic Capital Management showed the best level of income from May 2015 - since its inception.

Voting for a way out of the EU has not brought profit to Quadratic Capital Management as such, However, the fund earned with help of different strategies, intended to make money during events such as last Friday.

Quadratic Capital Management, which is headed by one of the few women in the industry, Nancy Davis, manages $ 428 million.

Schonfeld Strategic Advisors, managing two funds and funds of billionaire Steve Schoenfeld, has had a fantastic profit. This year, the company's income was measured in double digits. Last Friday, however, left the company in the black, said CIO Ryan Tolkin.

He declined to give exact figures, or pronounce volume of assets managed by the company but said that Schonfeld manages about $ 12.5 billion including borrowings.

Schonfeld, like many hedge funds, did not make a bet on the Brexit vote’s outcome.

"We try not to take any position on the dual issues", - noted Tolkin.

Other managers seem to have also benefited from the surge in volatility. Systematic business strategy Winton Capital allowed to earn 3.1% on Friday. ISAM Systematic Master ISAM also cashed in by 4% early in the morning on Friday. 

Crispin Odey, who manages about $ 10.2 billion in his macro-oriented company, said his fund gained 15% thanks to victory of the Brexit supporters, recouping some of the losses this year.

Legendary investors George Soros and Druckenmiller also profited from the falling market.

June 24, stocks of British American Tobacco Plc jumped by 2.6%, despite the fall in the FTSE 100 Index, Bloomberg reported. In annual terms, British American Tobacco Plc rose by 16%. The company’s second largest owner is Capital Group, which increased its share of the tobacco producers for 2016 to 5.6%. Capital Group declined to comment.

Another company, whose shares rose on the Brexit wave is an index fund SPDR Gold Shares. Its shares jumped 4.8% thanks to rising gold prices. The fund’s beneficiary Eton Park Capital Management also refused to comment.

shares of the Swiss financial conglomerate UBS Group AG also increased by 2.5%.

British construction company Taylor Wimpey showed the greatest losses amid Brexit. Its shares fell 29% due to concerns that demand for residential real estate would decline.

Shares of Royal Bank of Scotland Group Plc tumbled 18% after Brexit on expectations of profit decline in domestic-oriented banks.