Key Takeaways
- • Two prominent short-selling operators merge: Dan Yu (Gotham City Research) and Cyrus De Weck (Portsea Asset Management) are launching General Industrial Partners, a dedicated short-selling hedge fund set to launch in early 2023, combining expertise from two of the sector's most successful research firms.
- • Track record includes major wins: The founders' previous campaigns targeted high-profile failures including Wirecard (which generated €1bn+ in short-seller profits upon collapse in 2020), Steinhoff (2017 accounting collapse), NMC Health (2020 fraud-driven administration), Let's Gowex (bankruptcy with falsified accounts), and Quindell—demonstrating consistent ability to identify financial fraud and accounting irregularities.
- • Portfolio structure balances concentration and diversification: The fund will maintain 15–20 short positions hedged with baskets or indices of stocks, with flexibility to establish highly concentrated bets against specific targets through separate vehicles when conviction is sufficiently high.
- • Launch timing targets market downturn: The fund enters the market following a prolonged bull run period during which short sellers faced significant headwinds, positioning the new vehicle to capitalize on what the founders anticipate will be a more favorable environment for short-selling strategies.
Summary
Dan Yu and Cyrus De Weck, founders of two of the most prominent short-selling research operations, are combining their expertise to launch General Industrial Partners, a dedicated short-selling hedge fund slated for launch in early 2023. The partnership unites two names with substantial track records identifying corporate fraud and financial irregularities across European and global markets.
Gotham City Research, founded by Yu, gained prominence through high-impact campaigns against Spanish WiFi provider Let's Gowex (which subsequently filed for bankruptcy and acknowledged falsified accounts) and Quindell, an insurance claims processor. Portsea Asset Management, established by De Weck, built its reputation on profitable positions against companies including NMC Health, the former FTSE 100–listed entity that entered administration in 2020 following the discovery of multibillion-dollar fraud. Both firms identified opportunities in Steinhoff, the South African conglomerate whose 2017 accounting irregularities precipitated share price collapse, and Wirecard, the German technology company whose 2020 failure generated more than €1 billion in profits for short sellers within a single week.
The new fund will operate a portfolio strategy centered on 15–20 short positions, with each position hedged through baskets or indices of stocks to manage downside exposure. When Yu and De Weck identify a particularly compelling target warranting concentrated conviction, they intend to establish separate vehicles for higher-conviction bets against specific equities. This dual-structure approach allows the fund to balance disciplined portfolio construction with opportunistic positioning.
The launch arrives during a challenging period for short-selling strategies. The sector endured an extended bull market characterized by periods of exuberance during which equity markets displayed limited sensitivity to company quality fundamentals, forcing many short-selling funds to generate suboptimal returns. The founders' timing suggests confidence that macroeconomic conditions are shifting toward an environment more favorable for identifying and profiting from overvalued or fraudulent securities. General Industrial Partners will operate as one of a limited number of hedge funds maintaining dedicated short-selling focus, positioning it within a specialized but historically lucrative segment of the alternative investment universe.
Gotham City Research, founded by Yu, gained prominence through high-impact campaigns against Spanish WiFi provider Let's Gowex (which subsequently filed for bankruptcy and acknowledged falsified accounts) and Quindell, an insurance claims processor. Portsea Asset Management, established by De Weck, built its reputation on profitable positions against companies including NMC Health, the former FTSE 100–listed entity that entered administration in 2020 following the discovery of multibillion-dollar fraud. Both firms identified opportunities in Steinhoff, the South African conglomerate whose 2017 accounting irregularities precipitated share price collapse, and Wirecard, the German technology company whose 2020 failure generated more than €1 billion in profits for short sellers within a single week.
The new fund will operate a portfolio strategy centered on 15–20 short positions, with each position hedged through baskets or indices of stocks to manage downside exposure. When Yu and De Weck identify a particularly compelling target warranting concentrated conviction, they intend to establish separate vehicles for higher-conviction bets against specific equities. This dual-structure approach allows the fund to balance disciplined portfolio construction with opportunistic positioning.
The launch arrives during a challenging period for short-selling strategies. The sector endured an extended bull market characterized by periods of exuberance during which equity markets displayed limited sensitivity to company quality fundamentals, forcing many short-selling funds to generate suboptimal returns. The founders' timing suggests confidence that macroeconomic conditions are shifting toward an environment more favorable for identifying and profiting from overvalued or fraudulent securities. General Industrial Partners will operate as one of a limited number of hedge funds maintaining dedicated short-selling focus, positioning it within a specialized but historically lucrative segment of the alternative investment universe.
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