Meet the Hedge Funds

“It is like all the vultures of the world are congregating on Reykjavik to buy assets at rock bottom prices.” These were the words of an unidentified Icelandic businessman reported by Icelandic Business Weekly (Viðskiptablaðið) on October 15, 2008. The article also claimed that 100 vulture capitalists had descended on the island the day before, with the intent of wringing assets out of the just-fallen banks at fire sale prices. The banks’ carcasses had been severely mauled, first during the passage into receivership and then through the UK terrorism legislation, which froze Landsbanki’s assets and pulled the banks’ UK subsidiaries into liquidation. Gordon Brown, meanwhile, threatened that other Icelandic assets could be seized as well. That did not happen, but British banks did freeze all payments belonging to the Icelandic entities for the rest of the month (see Chap. 3 ). This, of course, froze out UK customers as well as Iceland’s business interests. The most severe effects fell on the UK retail sector, where the three banks had been very active lenders and partners in leveraged buyouts. “In just 10 days, Iceland’s economy has been devastated. The reverberations are set to engulf the British high street,” The Guardian UK would exclaim. Of course, the troubles of one group are the opportunities of others.