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Bloomberg.com – Devaney’s Funds Wiped Out After United Capital Gets Margin Call
John Devaney is liquidating hedge funds at his United Capital Markets Holdings Inc. after failing to meet a margin call from Deutsche Bank AG. Deutsche Bank seized and auctioned off collateral after the Horizon group of funds failed to meet the bank’s demands, according to a letter to clients obtained by Bloomberg News yesterday. The funds were frozen a year ago because of wrong-way bets on mortgage securities. “The survival of the funds and any potential recovery for their investors has been dependent on these lenders continuing their relationships with the funds,” Devaney wrote in the letter dated July 9. United Capital is based in Key Biscayne, Florida.
Comment To appreciate this story, you need to remember Devaney’s history.
Back on July 5, 2007, Devaney’s funds were in trouble. This prompted him to put his 140 yacht “Positive Carry” up for sale. This put on hold his plans from an April 12, 2007 New York Times profile (aka, “puff piece”) where he was mulling a run for Senate from Florida.
Then on February 2, 2008, after losing 35% in 2007 and not allowing client withdrawals from his funds (“closing the gate”), he planned his “big comeback”:
“Just because I lost money doesn’t mean I will quit, no way,” Devaney, who sold his boat “Positive Carry” and Gulfstream IV, said in a telephone interview from Key Biscayne, Florida. “Prices have collapsed and this is the best opportunity I’ve seen in my career.”
Devaney should have quit when he was down 35%. It is better than being down 100%.