Geode Capital Management, one of the world’s largest hedge funds, closes it doors today after its derivatives trades went horribly wrong. Fidelity is one of the largest investor in Geode Hedge-Fund providing derivative hedging strategy.
On a single fund, Geode is said to have lost $250 million after its bets in the derivative markets went south trigerring margin calls and ending with a lost of 36% by spring. Facing major losses, its biggest backer and investor Fidelity, pulls out its funds from the hedge-fund.
Geode started out as a boutique hedge-fund investing the fortunes of founding family of Fidelity – the Johnson family. The fund aimed to deliver 5%-6% returns on investment, a conservative sum by any standards.
Geode Capital Management manages about $719 billion dollars in asset under management. Its derivatives fund makes up about 10% of its assets under management. Hedge-funds are notorious in marketing their funds as providing leading edges against other market participants. However in the last year, 95% of all hedge funds under performed.