Michael Burry used six counterparties for his credit default swaps to limit exposure to any one of them.

Judged as of 2010-04-06. True: records show that Scion's mortgage CDS positions were spread across six dealer counterparties, chosen to limit exposure to any single one. Mostly true: the positions were deliberately spread across several counterparties, but the count was slightly different (five or seven). Mixed: the positions were spread across counterparties, but the number differs a good deal, or there is no evidence that the spread was meant to limit exposure. Mostly false: nearly all of the exposure was with one or two counterparties, with only token amounts elsewhere. False: Scion used just one or two counterparties.

Set before the research began.

1. E1 Scion-Capital-Letters.pdf Scribd (uploaded copy of Scion Capital investor letters) Own record

   “The Funds have six counterparties from which credit protection on subordinated tranches of mortgage-backed securities has been purchased.”

2. E2 Scion-Capital-Letters.pdf Scribd (uploaded copy of Scion Capital investor letters) Own record

   “The creditworthiness of our counterparties is an integral part of the investment thesis, We have chosen counterparties that are among the largest banks and securities houses in the world”

3. E3 Betting on the Blind Side Vanity Fair · 1 April 2010

   “In a few weeks Mike Burry bought several hundred million dollars in credit-default swaps from half a dozen banks, in chunks of $5 million.”

A Scion Capital investor letter states that the Funds bought credit protection on subordinated mortgage-backed tranches from six counterparties (E1). An independent Vanity Fair excerpt also says Burry bought credit-default swaps from half a dozen banks (E3), so the count matches. The same letter says counterparty creditworthiness was an integral part of the thesis (E2), which shows concern about counterparty risk. However, no source says outright that the positions were spread to limit exposure to any one bank, so the stated reason is only partly supported.