By now most of you are probably familar with the decline in PXRE Group (PXT) which fell $7.84 (66%) in yesterday's trading after it said losses from this summer's hurricanes would be higher than expected. Among its largest shareholders are three of the most respected hedge funds in the world, D.E. Shaw ($19 bln under management), Och-Ziff Capital Management ($10 bln under management), and Eton Park Capital Management ($3.5 bln under management). Based on their holdings as of year end 2005, the decline in PXT year to date has had a negative impact of 0.27% for D.E. Shaw, 0.41% for Och-Ziff, and a hefty 1.40% for Eton Park.
To us what is most noteworthy about this story is that these hedge funds are run by some of the most successful traders in the world, and yet they were still caught holding the bag. For example, if you do a Google search on Eton Park Capital Management, the first result reads as follows: "Eton Park Capital Management: Started last year by former hot-shot Goldman Sachs proprietary trader Eric Mindich."
This makes us wonder, has the playing field leveled out, or is the market just a crapshoot as the random-walkers would have us believe. In any case, we should all print out a chart of PXT and remember this story, so that the next time you wake up to see that one of your holdings is down big following a negative news event, you can take solace in the fact that it can happen to anybody.