(Bloomberg) -- BlueMountain Capital Management, the former high-flier that gained renown for a winning bet amid the London Whale tumult, is closing its flagship hedge fund and losing a co-founder a week after the firm’s purchase by Assured Guaranty Ltd.
Co-founder Stephen Siderow will leave by the end of the year, the firm said Tuesday in a statement. Earlier this month, the $19 billion BlueMountain was sold to Assured Guaranty for $160 million.
The hedge fund started by Andrew Feldstein and Siderow was hailed for making $300 million in 2012 by betting against JPMorgan Chase & Co., which was embroiled in the infamous London Whale credit securities scandal. Since then, the firm has had a series of setbacks. Its flagship fund has struggled to perform, and earlier this year BlueMountain shuttered its $1 billion computer-driven portfolio and its long-short equities book.
In May, Affiliated Managers Group Inc. -- BlueMountain’s then-majority shareholder -- wrote down the of its stake by $415 million after determining that the firm’s growth prospects had dimmed. It has also seen staff depart. As of August, BlueMountain employed about 140 people compared with 252 in March.
The $2.5 billion flagship BlueMountain Credit Alternatives Master Fund has been struggling for years. It hasn’t met its annual return target of 8% to 10% since 2012 and lost money last year. Since inception in 2003, the fund has returned an annualized 6.7%.
Still, it charges performance fees of as much as 30% -- higher than the industry standard.
Over the past three years, the fund’s assets have plunged $4 billion as frustrated investors asked for their money back. Bloomberg reported in August that BlueMountain’s clients had asked for an additional $2 billion in redemptions over the next three years.
Industrywide, hedge fund closures are on the rise. In the first half of this year, 399 hedge funds have shut, an increase from the first half of 2018, according to Hedge Fund Research Inc.
BlueMountain plans to launch new strategies related to collateralized loan obligations and structured finance.
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