In 2015, Everest Capital, a Miami-based hedge fund specializing in emerging markets, suffered catastrophic losses due to a bad bet on the Swiss franc. The collapse marked a dramatic reversal for founder Marko Dimitrijevic, who had previously successfully navigated emerging market crises, such as the 1997 Asian financial crisis and the 1998 Russian default.
Dimitrijevic was recognized as a pioneer in emerging and frontier markets, investing in over 150 countries, including 120 emerging markets such as China, Russia, Indonesia, Bangladesh, and Saudi Arabia. His book, Frontier Investor: How to Prosper in the Next Emerging Markets, was praised by Nobel Prize–winning economist Michael Spence as a “tour de force.”
Dimitrijevic founded Everest Capital in 1990, focusing on emerging markets. By 2015, the firm managed over US$3 billion in assets across multiple funds, with the flagship Everest Capital Global Fund holding US$830 million. The firm was known for its high-risk, high-reward strategies, leveraging investments in volatile markets.
The Swiss National Bank unexpectedly removed its three-year cap on the franc’s value against the euro in January 2015, causing the franc to soar by over 30%. Everest’s largest fund, the Global Fund, which managed US$830 million, had heavily leveraged positions betting on the franc’s decline. This miscalculation wiped out nearly all its assets, forcing the fund to close. The losses, amplified by borrowed money, triggered significant investor redemptions. By March 2015, Everest Capital had shut down six of its seven remaining funds, with assets dropping from over US$3 billion to US$570 million in its sole remaining emerging markets fund.
In 2015, Dimitrijevic founded Volta Global, a diversified investment firm focusing on private equity, venture capital, real estate, and public markets. Unlike Everest, Volta operates with a permanent capital base.
The Everest Capital collapse was another high-profile example of how leverage and concentrated bets can amplify losses in unpredictable markets. Unlike other hedge fund failures described in Famous Frauds & Financial Failures (e.g., LTCM’s bailout, covered in Chapter 7, and Amaranth’s natural gas losses, covered in Chapter 5), Everest’s downfall didn’t have a systemic impact, but it was still devastating for its investors and the investment manager.
Sources:
Krasny, Ros (2015), “Hedge Fund Everest Capital Falls off a Swiss Cliff,” CNBC.com, March 16: https://www.cnbc.com/2015/03/16/everest-capital-falls-off-a-swiss-cliff…
Kreutzer, Laura (2015), “Everest Capital to Close $830 Million Global Fund after Losses on Swiss Franc,” The Wall Street Journal, January 17: https://www.wsj.com/articles/everest-capital-to-close-global-fund-after…
No author listed (2015), “Large Everest Capital Hedge Fund Closing after Swiss Franc Losses,” Reuters.com, January 17: https://www.reuters.com/article/us-swiss-snb-everest-idUSKBN0KQ0N920150…
Ring, Suzi (2015), “Swiss Franc Trade Is Said to Wipe out Everest’s Main Fund,” Bloomberg.com, January 18: https://www.bloomberg.com/news/articles/2015-01-17/swiss-franc-trade-is…