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...

TAKE A FREE TRIAL

The full contents of this article are available to active AR subscribers and trialists only.

To continue reading please,
take a free trialsubscribe or log in to AR.

Subscribe

Subscribers have unlimited access to all current and archive content. Start your subscription today - click on the button below.

Subscribe now