Omega, Jabre Capital Among Hedge Fund Casualties in Dismal 2018
(Bloomberg) -- It has been yet another year to forget in the world of hedge funds.
Hardly a month went by without news of the high-fee money managers -- young and old, running large and small shops, big and little-known names -- shutting down. Many struggled to navigate markets marked by violent stock swings and slumping oil prices, others decided to restructure their firms to make riskier or longer-term bets, while some said they simply had enough of trading. Now as the year comes to a close, the $3.2 trillion industry is headed for its worst annual performance since 2011.
Despite the slew of high-profile managers from T. Boone Pickens to Leon Cooperman throwing in the towel, hedge funds are closing at the slowest pace since 2007, when 563 shut down, according to Hedge Fund Research. About 444 funds shuttered in the first nine months of the year, the data provider said. That’s well below the record 1,471 liquidations during the 2008 financial crisis.
Here’s a look at some of the year’s most notable closures.
- Funds included: BP Capital, Verrazzano, Ivaldi
- Strategies: Commodities, long-short equity
- Markets: Stocks opened with a positive outlook, before erasing part of the gains in the final days of the month. Still, the S&P 500 rose 5.6 percent, and the yield on 10-year U.S. Treasuries climbed to 2.7 percent.
Pickens, a legendary oil investor, said he was shuttering his BP Capital, writing in a LinkedIn post that oil trading was no longer intriguing.
Guillaume Rambourg announced he was turning his Paris-based Verrazzano Capital into a family office. Rambourg, who set up the more than $600 million firm in 2011, said he decided to “embark on a new life path.”
Ivaldi Capital, the long-short equity fund founded by former Citigroup Inc. prime brokers in 2009, was shutting both its London and Singapore offices after its largest investor pulled out. The closure wasn’t performance-related -- the flagship fund gained 13 percent last year.
- Funds included: Pennant Capital
- Strategies: Long-short equity
- Markets: February’s rout extended into March as the S&P 500 fell 2.7 percent, and tech weighed on markets. President Trump’s decision to slap tariffs on Chinese goods heightened trade war fears, adding to volatility.
Alan Fournier told investors he was returning client money at his $1.5 billion Pennant Capital Management, which he founded in 2001. The veteran stock-picker cited “disappointing” recent performance, and will convert Pennant into a family office.
- Funds included: Pelorus Jack, Blockhouse
- Strategy: Long-short equity
- Markets: Escalating trade tensions and central-bank hawkishness whipsawed equities, but the quarter ended on an upbeat note as the S&P 500 eked out a gain for a third straight month.
Pelorus Jack Capital, the long-short equity fund started by Passport Capital alum Tim Garry, planned to shut down after about a year of trading. The Pelorus Jack Onshore Fund had lost 2.5 percent between April and November of last year, according to an investor update.
Jack Franke and Eric Lee decided to liquidate their hedge fund Blockhouse Capital Management after about two years in business. They told investors that the current market environment may prevent them from generating the expected performance.
- Funds included: Omega Advisors, Vilk Commodity
- Strategies: Long-short equity, commodities
- Markets: The S&P 500 climbed 3.6 percent amid less volatility as trade optimism lifted manufacturers and tech stocks rebounded. Oil wasn’t so lucky -- it fell more than 7 percent on trade concerns.
Leon Cooperman told investors that he would convert his $3.8 billion Omega Advisors into a family office. Cooperman said this was a personal decision, and that the firm’s main fund was up 7 percent at the time. Omega’s Credit Opportunities Fund was slated to remain open under a new name.
Vilk Commodity Services said it was closing due to tough investing conditions and growing regulatory pressures on smaller money managers. The metals-focused fund was up 1.1 percent in the first half of 2018 and had made money every year since its inception in 2012.
- Funds included: Tourbillon, SPO Partners, Highfields
- Strategies: Long-short equity, value investing
- Markets: Volatility spiked and both U.S. stocks and hedge funds had their worst month in seven years, driven in part by a drop in tech shares amid renewed trade threats and concerns that rising rates would curb growth.
Tourbillon Capital Partners planned to close its main fund after losses and return more than $1 billion to investors. Jason Karp, who started Tourbillon in 2012, left the door open to managing client money again, and said he plans to focus on health and wellness investments.
SPO Partners & Co. said it was closing after almost five decades of managing money. SPO co-managing partner Eli Weinberg told investors that the $5 billion firm’s value investing approach was “proving difficult to execute.”
Highfields Capital Management said it was returning client money after almost two decades in business. Founder Jon Jacobson told investors that he was “ready for a change.” His $12.1 billion stock hedge fund had struggled in recent years, and Jacobson planned to start a family office.
- Funds included: Brenham, Gruss Capital
- Strategies: Commodities, event-driven
- Markets: The S&P 500 rose 1.8 percent, and money managers piled into bets against oil as crude futures dropped 22 percent -- closing out the commodity’s worst month since the global financial crisis.
John Labanowski told investors he was closing his $800 million Brenham Capital Management after two years of losses and shrinking assets. Labanowski blamed “shorter and more violent” oil-market cycles, and OPEC’s inconsistent policy.
Gruss Capital Management told investors it was winding down as the firm struggled to make money. New York-based Gruss started in 2000 and followed a strategy that bet on mergers and acquisitions.
- Funds included: Abberton, Jabre, River Birch, BBL Commodities, Tricadia
- Strategies: Long-short equity, multi-strategy, commodities, credit
- Markets: The S&P 500 fell almost 11 percent through Dec. 26. The gauge rebounded after earlier falling to the brink of a bear market. Emerging-market stocks were headed for a third straight quarter of declines, and the VIX, a measure of volatility, hit the highest level since February.
Fredrik Juntti decided to return all of Abberton Capital’s $200 million in assets to clients, given the tough environment for raising money coupled with his own personal reasons.
Jabre Capital Partners said it was returning client money in the three funds run by Philippe Jabre, who started building his namesake firm in 2006. Jabre said the market was becoming more difficult to anticipate. The Geneva-based firm managed about $1.2 billion as of April.
River Birch Capital, the New York-based credit fund run by former Lehman Brothers Holdings Inc. executives, planned to shut after suffering a sizable withdrawal from a key investor.
BBL Commodities closed its flagship fund, which accounted for about 10 percent of the firm’s $500 million under management. The firm said it would stay in business and focus on managing money for individual clients through managed accounts.
Tricadia Capital Management was closing its hedge funds after assets in its flagship credit strategy fell from a peak of more than $3 billion in 2014. Founders Arif Inayatullah and Michael Barnes planned to stay at Tricadia, which has about $200 million in two private-equity vehicles. They aim to raise money next year in products with a drawdown structure.
©2018 Bloomberg L.P.