Hedge Fund PointState Holds Back Even More Investors’ Cash

(Bloomberg) -- Zach Schreiber’s PointState Capital has locked up even more of investors’ cash as clients abandon the hedge fund amid flagging returns and virus-fueled uncertainty.

Clients withdrawing money at the end of March had to leave almost a quarter of it behind in newly created portfolios, according to a letter to investors. That’s almost double the amount that PointState held back from those that exited three months earlier.

The macro hedge fund is suffering outflows amid lackluster performance and the pandemic’s rampage through global markets. Investors are expected to pull another $150 million in the second quarter, said a person familiar with the matter, who asked not to be identified because the details aren’t public. Clients yanked about $2.1 billion in the first three months.

Investors who redeemed at the end of March received 77% back in cash, with the rest held as shares in portfolios created to hold assets with “somewhat limited liquidity” which take longer to sell, the letter said. Earlier this year, the firm said clients that withdrew funds at the end of 2019 would have 12% of their investment held back.

A combination of poor returns and redemptions has seen New York-based PointState’s overall assets dwindle from $5 billion at the end of last year to $3.4 billion at the end of April, the person said. The main fund is down about 12% this year through April, according to another investor letter.

Side-Pockets

In the last financial crisis, many hedge funds shifted hard-to-sell assets into so-called side pockets to buy time to raise cash as clients rushed to yank their money. They were designed to give money managers time to find the best price for assets rather than dump them in a fire sale to meet redemptions.

The recent woes of the hedge fund firm founded by former traders for billionaire Stan Druckenmiller cap several years of poor performance, senior departures and investor outflows.

PointState has underperformed compared with other macro funds, which follow economic trends and bet across equities, fixed income, currencies and commodities. Brevan Howard Asset Management and Rokos Capital Management both reported their best ever months this year.

PointState has failed to recover the 19% loss it incurred in 2018, which in part came from a wrong-way bet on oil stocks. The worst of this year’s decline was an 8% drop in February.

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