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There's Money to be Made in Sub-Prime's Debris

Not everyone's getting hammered by the sub-prime market's fallout. Some bankers at Deutsche may even see bigger bonuses because of it.

According to Bloomberg, the German bank could be on track to reap anything from $270 million to $540 million from the crisis, thanks to a strategy that allowed traders to sell sub-prime mortgage contracts that appreciated as the U.S. housing market fell.

It all seems to be the work of analyst Eugene Xu, who apparently foresaw the sub-prime meltdown two years ago. The main beneficiaries of his advice are likely to be (a) himself and (b) members of Deutsche's fixed income trading team. Bloomberg quotes Kinner Lakhani, an analyst at ABN AMRO in London, as saying traders led by Gregg Lippman, global head of asset backed securities trading and syndicate at Deutsche, sold index contracts based on Xu's advice.

Deutsche won't be alone in making hay out of sub-prime. The Financial Times quotes Gary Vaughan-Smith, former head of the Alternative Investment Group at ABN AMRO, as predicting, "hedge funds will win more than they lose (out of the crisis)." Hedge funds Hayman Capital and Corriente Advisors, plus San Francisco-based Passport Capital, are all said to have made money so far.

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AUTHORAnonymous Insider Comment
  • da
    david mann
    1 September 2008

    interested in this article

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