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George Soros’s Quantum Fund Gains $7 Billion from Shorting the British Pound

Today, George Soros is an American-Hungarian billionaire who is currently known as a prominent philanthropist, investor and author. George Soros is estimated to be worth about $23 billion and has given out almost $11 billion to charity through his Open Society Foundation. Soros first rose to fame by profiting billions from short selling the British pound in 1992.

In September 1992, Soros and his Quantum Fund, risked almost $15 billion on a bet that Britain would be forced to devalue its pound. In 1992, the whole market expected that Great Britain would inevitably devalue its currency. It was evident that no amount of currency purchasing and interest rate hikes would change that. By September, it was clear that Britain was going to exit the ERM after devaluing its currency.

Speculators like George Soros had done the math way before signs of the impending devaluation of the pound became evident and borrowed heavily to bet against this. Soros was by then leading Quantum Fund and together with his partners, they pocketed more than one billion dollars each.

The much Awaited Announcement

On September 16, 1992, Lamont called a press conference to announce the exit of Britain from the ERM and the subsequent floating of its currency on http://www.marketwatch.com/story/is-george-soros-right-about-the-coming-crash-in-china-2016-04-22. The speculators of the devaluation had been proven right and had pocketed billions in one trade.

Black Wednesday: September 17, 1992

Once Britain announced that it was devaluing its currency the previous night, the pound fell by a whopping 25 percent compared to the US dollar. In comparison to the Deutschmark, it fell by 15 percent. While many investors lost money, speculators who had shorted the British currency were smiling to their banks. Soros’ Quantum Fund had a $15 billion bet against the fall of the pound and after a few months, the fund had over $22 billion.

The fund had made over $3 billion the day after the pound was floated in the market. It increased from $15 billion to $19 billion. After a few months, it had reached $22 billion. From the trade, George Soros is said to have pocketed more than $1 billion and joined the billionaires club.

The Investment Prowess of George Soros

George Soros is credited to have led his fund, Soros Capital Management, to gaining over 30 percent consistently from 1979 to 2011. This shows the investment prowess of the billionaire who has amassed billions from his hard work and ingenuity in capital and financial markets. He is a master of accurately translating economic trends and making good judgment calls that earned his fund billions.

Soros is a seasoned short term speculator who made huge bets in financial markets and almost always won. He believes that most market participants move in herds and influence one another. Today, he is retired and is involved in various philanthropic activities. 

Originally published at http://www.valuewalk.com/2016/05/george-soros-broke-gbp-trade-century/