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

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.