BlueCrest's Platt Says European Banks Insolvent, Crisis Growing
Dec. 15 (Bloomberg) -- Michael Platt, the founder of the $30 billion hedge fund BlueCrest Capital Management LLP, said most of the banks in Europe are insolvent and the situation will worsen in 2012 as the region's debt crisis accelerates.
"I do not take any exposure to banks at all if I can avoid it," Platt said in an interview on Bloomberg Television today. If European lenders had to mark their books to markets every day in the same way hedge funds do, most would be proven "insolvent," he said.
BlueCrest is pouring money into U.S. Treasuries and short- term German debt because of concerns about market volatility and counterparty risk, Platt said. BlueCrest Capital International, the fund he personally manages in Geneva, has risen about 5.6 percent in 2011, posting gains when hedge funds broadly are on pace to have their second-worst year ever.
Platt said he's disappointed in the measures that came out of last week's meeting of European leaders, saying they were too focused on budget cuts. Austerity will ultimately lead to slower growth in Europe, making the region's debt woes even worse, he said. A solution will come when the European Central Bank pumps significant amounts of money into economies, something it lacks a mandate to do, Platt said.
"We need much more radical measures," he said. The continuing crisis will make European nations look "more like Greece," he said.
Brussels Agreement
The debt crisis began two years ago in Greece and has spread to Ireland, Portugal, Italy and Spain. At last week's meeting in Brussels, European leaders proposed their fifth attempt at a solution since May 2010, agreeing on a closer fiscal union and a willingness to add 200 billion euros ($260 billion) to International Monetary Fund coffers.
While hedge funds have had bearish views on Europe, they've struggled to make money on the crisis. Global market volatility has prompted hedge funds to decline 4.4 percent on average this year through November, according to Chicago-based Hedge Fund Research. The industry lost a record 19 percent in 2008.
Hedge funds have struggled because there hasn't been an obvious trend and there have been periods of bullishness that have confused traders, Platt said.
"The process has been unfolding over two years," he said. "It has been extremely gradual and there's been a lot of optimism that a solution will be found."
To contact the reporters on this story: Stephanie Ruhle in New York at sruhle2@bloomberg.net Jesse Westbrook in 東京 at jwestbrook1@bloomberg.net
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net
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