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July 25, 2008 7:29:55 AM CDT

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Hedge Funds Cash In on Collapse of Bear

Posted Mar 20, 08 9:25 AM CDT in Business 

(Newser) – 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."

Source Wall Street Journal

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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)
Steven Raphael, a broker with Bear Stearns, enters the company headquarters on Monday, March 17, 2008 in New York.   (AP Photo/Mark Lennihan)
A sign of above the entrance to Bear Stearns headquarters is seen in New York.   (AP Photo/Jin Lee)
Graphic shows daily trading and timeline of events for Bear Stearns since June 2007.   (AP Photo)
A businessman runs past Bear Stearns in New York on Friday, March 14, 2008.   (AP Photo/Mark Lennihan)
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Wall Street  • Bear Stearns  • SEC  • hedge fund  • short selling  • Harbinger Capital


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