A single bad currency bet has caused one of the largest and longest-standing private investors in emerging markets to collapse.
Everest Capital—a 25-year-old hedge fund firm that counted George Soros and Nelson Peltz as early backers and has ties to Condoleezza Rice and Robert Gates—is closing six of its seven remaining hedge funds, according to a private letter sent to investors Feb. 24.
The move comes after its largest fund, Everest Capital Global, suffered crippling losses in January and was shut down.
Everest, which overall managed more than $3 billion at the end of December, had bets on the Swiss franc that backfired when the Swiss National Bank shocked markets in mid-January by removing a cap on the currency's value versus the euro. That caused the Swiss franc to soar more than 30 percent versus the euro, burning many investors in what had seemed like a low-risk trade.
The exact loss for Everest was unclear, but it was likely magnified by borrowed money, according to experts. A large portion of the fund's $830 million assets was wiped out, according to a person familiar with the situation.
"I am saddened that our firm—which over the past 24 years identified and invested in hundreds of exciting investment opportunities in emerging markets—will cease to operate in its current form as a result of the events impacting the Global Fund," founder Marko Dimitrijevic wrote in the letter.