Echo Street to Return Hedge Fund Cash, Focus on Other Strategies

Echo Street Capital Management is giving back investor money in its $2 billion market-neutral hedge fund.

The firm will continue its long-only fund, which holds about $6 billion and is likely to close to new investors in the coming months, said a person briefed on the matter, who asked not to be named as the information is private.

The hedge fund will return 90% to 95% of its capital on Oct. 1, according to a document viewed by Bloomberg. Clients will be asked to decide around the week of Sept. 21 whether to redeem the cash or reallocate it into either of two other funds -- the long-only GoodCo Select or a new vehicle, Echo Street Select Plus, which will launch Nov. 1 and have the ability to short.

Echo Street is shifting away from the market-neutral strategy amid the chaos fueled by the Covid-19 pandemic, which brought economic activity to a standstill and sent stocks reeling in March. The S&P 500 has rallied 49% from its low, helped by fiscal policies aimed at fighting economic damage from the outbreak.

The fund Echo Street plans to close is down about 9% this year, according to the person. The fund rose 23% last year, 7% in 2018 and 11% in 2017. Since inception in 2002, it’s returned an annualized 9.4% through July. The firm’s long-only fund gained an annualized 21.5% from its launch in 2015 through July.

A spokesman for the New York-based firm declined to comment.

Echo Street focuses on investing in durable companies that consistently increase net asset value, according to its website.

©2020 Bloomberg L.P.

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