Anchorage to Close $7.4 Billion Hedge Fund as Ulrich Era Ends
(Bloomberg) -- Kevin Ulrich’s two-decade run at the top of Anchorage Capital Group is over.
The co-founder of what was once among the world’s biggest distressed-debt hedge funds said he’s closing the flagship vehicle and ceding his day-to-day role as chief executive officer, after years of client withdrawals and uncooperative markets.
The unwinding of the $7.4 billion fund, which managed almost twice that amount just a few years ago, is one of the most prominent and largest hedge fund closures this year.
In a letter Wednesday, Anchorage told clients it will focus on its lower-fee, $18 billion structured-credit business and the $4 billion it manages in longer-lockup distressed-credit products. The firm joins others, including Ken Griffin’s Citadel and Izzy Englander’s Millennium Management, that have sought to hold onto client capital for extended periods.
Current credit markets “present challenges for an evergreen fund designed to tactically allocate capital across the credit spectrum,” Ulrich, who will become chairman and relinquish day-to-day responsibilities, told clients. Yale Baron, global head of structured credit, and Thibault Gournay, who oversees research, will become co-chief investment officers.
Buoyant equity markets, low default rates and central bank policies were among reasons Ulrich cited as impediments to the typical credit hedge fund strategy, which allows for more frequent investor redemptions.
Anchorage had been bleeding assets, losing senior investment professionals and producing lackluster returns. It rose 0.6% in 2018, 1.5% in 2019 and 4.4% in 2020. This year, performance has improved, with the fund gaining 18.5% through November, driven by its longstanding investment in Metro-Goldwyn-Mayer.
Last year, a woman sued Ulrich, accusing him of sexual battery in a Manhattan hotel in 2019 -- a complaint that was later withdrawn. Institutional Investor, citing an Anchorage client, reported in November 2020 that Ulrich settled with the accuser and that clients were displeased by the firm’s failure to disclose the allegations after they became a matter of public record.
Ulrich, 51, joined MGM’s board in 2010 after the movie studio emerged from bankruptcy, and he became its chairman in 2017. That year, Anchorage closed the hedge fund to most new investments as it pivoted toward its other products.
Earlier this year, Amazon.com Inc. announced it was buying MGM, providing a big boost to Anchorage, which invested $500 million in the movie studio more than a decade ago. Its roughly 30% stake is now worth about $2.5 billion, people with knowledge of the matter have said.
Ulrich told clients he will oversee the unwinding of the hedge fund and work with Gournay and Baron in helping to determine the firm’s future.
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