US: Hedge fund sees 'Big Short' in education stocks

30 May 2010

Steven Eisman, a hedge-fund manager whose bet against the housing market was chronicled in a best- selling book, said he has found the next "big short" - higher education stocks - write Daniel Golden and John Hechinger for Bloomberg Businessweek.

The stocks of companies operating for-profit colleges could fall much as 50% if the US tightens student-loan rules, said Eisman, manager of the financial-services fund at FrontPoint Partners, a hedge-fund unit of New York-based Morgan Stanley.

An Obama administration proposal to limit student debt would slash earnings of Apollo Group Inc, ITT Educational Services Inc and Corinthian Colleges Inc by forcing them to reduce tuition and slow enrolment growth, Eisman said last week at a New York investment conference. Without new regulation, students at for-profit colleges will default on $275 billion of loans in the next decade, he said. Eisman is shorting, or betting against, shares of higher education companies because of the parallels he sees to the housing market.
Full report on the Business Week site

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