Hedge Funds Cash In on Collapse of Bear

Wagering the securities firm stock would fall paid off millions
By Jim O'Neill,  Newser User
Posted Mar 20, 2008 9:25 AM CDT
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)
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(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."