Moore adds ETFs for lots of leverage

Sat Jul 1, 2006

It's not unusual to find a smattering of exchange-traded funds thrown into the portfolio mix at many hedge funds. But Louis Bacon's Moore Capital Management takes ETF investing to a whole new level. The firm's most recent filings with the U.S. Securities and Exchange Commission shows that Moore Capital had the better part of $1 billion targeted at ETFs going into the second quarter - nearly 10% of the dollar value of its total portfolio.

For instance, the firm was sitting on roughly $225 million in options in Diamonds Trust Series, the industrials-heavy AMEX-listed fund. Diamonds' top holdings are an ensemble of old guard names like IBM and Johnson & Johnson, as well as cigarette-and-cheese maker Altria and oil giant Exxon Mobil.

Some hedge funds use ETFs as a mechanism to short. But in this case, it appears they were used to gain leverage. Indeed, Bacon's team was so enamored...

ISSN: 2151-1845 / CDC10004H

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