Gruss Capital Is Winding Down Hedge Funds After 18 Years

(Bloomberg) -- Gruss Capital Management, a hedge fund that traces its roots to pioneers of corporate merger bets, is closing after almost two decades as it struggles to make money, according to people familiar with the matter.

The New York-based firm told investors earlier this month that it will wind down its funds, said the people, who asked not to be identified because the business is private. Gruss Capital managed $1.5 billion, including borrowed money, at the end of last year, according to a regulatory filing. Chief Investment Officer Sean Dany declined to comment.

Gruss Capital was started in 2000 and followed a strategy used by Martin Gruss that bets on mergers and acquisitions. His father, Joseph, founded Gruss & Co. in the 1940s and, with Eugene Wyser-Pratte of Bache & Co., was among the famed risk arbitragers on Wall Street. Billionaire John Paulson had worked for Gruss before starting his own hedge fund.

Merger arbitrage in its modern form started after World War II and was initially called risk arbitrage. Today, event-driven funds, which also make wagers on corporate events such as spinoffs and management changes, account for about 26 percent of the $3.2 trillion hedge fund industry. They have returned 1.9 percent this year through October, according to the HFRI Event-Driven Index, compared with a 3 percent gain in the S&P 500 Index.

A slew of other hedge funds including Tourbillon Capital Partners and Highfields Capital Management in the past year have said they will close. The industry is battling poor returns and shrinking assets.

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