Feb. 6 (Bloomberg) -- SRM Global, the hedge fund run by former UBS AG trader Jon Wood, fell about 30 percent this year as of Jan. 18, dragged down by holdings in Countrywide Financial Corp. and Northern Rock Plc, said two investors in the fund.

The drop followed a loss of about 30 percent in 2007, said the investors, who declined to be identified. SRM Global, which 46-year-old Wood manages from Monaco, is the largest outside investor in Northern Rock, the U.K. mortgage lender that fell about 65 percent in London trading since the fund disclosed its stake on Oct. 10.

``He's going in while others are getting out,'' said Jerome Lussan, founder of London-based hedge-fund consulting firm Laven Partners. ``Time will tell if it's right.''

Wood opened SRM Global in 2006 after raising $3 billion from investors, including $500 million from Zurich-based UBS. He posted investment gains in each of his 16 years at UBS, Europe's largest bank by assets, according to SRM marketing materials seen by Bloomberg.

Wood, who declined to comment, told potential investors in marketing documents dated April 2006 that SRM Global would take concentrated bets in as many as 40 positions. Wood, who runs the fund with four former UBS colleagues, added that SRM Global would aim to profit by mainly holding stocks, including shares of companies going through takeovers, and exploiting price differences among related corporate securities.

The fund will take a ``a contrarian and long-term'' investment approach in ``companies or sectors which have been through periods of stress and are out of favor with the market,'' according to the marketing documents.

Northern Rock

SRM Global held 45.3 million shares, or 10.8 percent, of Northern Rock as of yesterday, according to a U.K. regulatory filing. Wood and RAB Capital Plc, the second-biggest outside shareholder of Northern Rock, bought shares of the Newcastle- based company after it received emergency funding in September from the Bank of England, the biggest bailout of a British lender in 30 years.

Wood called for an extraordinary shareholders' meeting on Jan. 15 to rally support against a possible nationalization of Northern Rock. Billionaire Richard Branson's Virgin Group Ltd. submitted a reduced 1.25 billion pound ($2.5 billion) plan on Feb. 4 to take over Northern Rock after Luqman Arnold's Olivant Advisers Ltd. dropped out of the contest.

Wood is opposing Countrywide's Jan. 11 agreement to sell itself to Bank of America Corp. of Charlotte, North Carolina, for about $4 billion. The Calabasas, California-based company plunged 79 percent in New York trading last year.

Countrywide Deal

SRM Global owned 30 million shares of Countrywide, or 5.2 percent, as of Jan. 24, after buying and selling at prices ranging from $5.20 to $9.12 in the previous 60 days, according to a filing with the U.S. Securities and Exchange Commission. The stock closed yesterday at $6.60.

``The merger agreement does not provide sufficient value,'' SRM Global said in a Jan. 31 filing. Bank of America's offer equates to less than $8 a share, while Countrywide's book value at the end of the year was more than $20, SRM said in a statement.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

SRM Global charges an annual management fee of 1 percent to investors who agreed to keep their money in the fund for five years and a 1.5 percent fee to those agreeing to a three-year lockup, marketing documents show.

Lockup Terms

The losses may lead clients to try to get their money back by pushing to change the lockup terms or asking the fund's board to switch managers, said Scott Berman, a lawyer at Friedman Kaplan Seiler & Adelman LLP in New York, who specializes in hedge-fund litigation and has worked on cases where investors pressured managers to change lockup terms.

``Given the losses, those might be strategies that investors could look into,'' Berman said.

Still, SRM investors may have little ground for complaint, said Lussan.

``You can't get double-digit returns without risk,'' said Lussan. ``You shouldn't buy a Ferrari if you're going to be worried about scratches when you park it in London.''

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Tom Cahill in London at tcahill@bloomberg.net

Last Updated: February 6, 2008 10:19 EST