Hedge fund manager Edward Misrahi reveals 'the best hedge of any portfolio'
Hedge fund manager Edward Misrahi, the founder and CIO of RONIT Capital, revealed the “best hedge” for any portfolio.
During an interview on Real Vision Television, former global macro fund manager Raoul Pal asked Misrahi for his best short idea at the moment.
“Well, this could get me more in trouble. There is one trade I think you would like… I think that the best tail-risk insurance there is right now is puts on Deutsche Bank,” Misrahi said.
Pal agreed, noting that he thinks the bank is going to go “bust.” In other words, he’s predicting they’ll be nationalized.
The value of a put option rises when the price of the asset it’s tied to falls.
Misrahi continued: “By the way, I think that they’re going to get nationalized…I think, for me, that’s like the best hedge of any portfolio. By the way, incredibly enough, you can still buy puts out-of-the money, not that expensively, which I find crazy.”
Broadly speaking, European banks have been getting crushed. Deutsche Bank (DB) has collapsed more than 40% this year, while Credit Suisse (CS) has plummeted more than 46%. Shares of Spanish banks Banco Popular and Bankia have also been pummeled. Both Pal and Misrahi agreed that Italian banks are a “total mess.”
Misrahi was a partner at Goldman Sachs and part of its equity proprietary trading group in New York. After Goldman, he helped found Eton Park, one of the largest hedge fund launches in history. He currently runs his hedge fund in London and is focused on emerging markets.
Pal, also a Goldman Sachs alum, previously co-managed GLG’s global macro fund, one of the largest in the world. He retired in 2004 at age 36 and now authors a research letter, The Global Macro Investor. He’s also the co-founder of Real Vision Television.
Head over to Real Vision Television for the full interview, which covers the investing environment around Brazil, Venezuela, Argentina, India, China, Russia, and Iran, including short and long-term opportunities in frontier and emerging markets.
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Julia La Roche is a finance reporter at Yahoo Finance.
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