
A bad run
The Aker Yards debacle turned out to be the beginning of the end for
Holte Capital. Since it was an isolated incident unrelated to any market
trend, the stocks we were short as a hedge did not react negatively to
the profit warning. Consequently, our hedges could not mitigate the
loss at all. Despite this, we still felt that our protection against the
industry and wider market made our general hedging policy sensible.
Since we hedged against so many risks, we needed higher leverage in
our trades to increase our overall returns. But when the hedges failed
to work, we would be hit by the double pain of a non-working hedge
and ...