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The Volkswagen squeeze

The revelation in October that German car manufacturer Porsche owned more of Volkswagen (VW) than had been thought sent the stock price of VW yo-yoing. The volatility caused huge losses on relative value trades put on by hedge funds. Ryan Davidson reports

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Porsche was once described as a "hedge fund with a car showroom" by Max Warburton, an analyst at New York-based investment management firm Alliance Bernstein. Many market participants felt there was good reason. The Stuttgart-based car manufacturer has consistently made huge sums of money through its equity options portfolio - in some years, more than it generated by making cars.

In its most

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