This year a wide variety of hedge funds have closed shop, mostly for one reason, poor performance. The strategy that has been particularly punished this year was short biased. Credit Suisse Short Bias Index is down -17.36% through August of this year, HFR is showing less abysmal returns, ad the HFRX EH: Short Bias Index is down 7.6% in the same period.
Perhaps due to the apparent inability of long/short equity to perform as well together, a number of hedge funds have started offering long-only products. In that league, tiger cubs have been particularly active, Caotue Management, Tiger Global and Hound Partners, all launched or are planning to launch long-only funds.
Currency-only hedge funds to wrap up
Most recently FX Concepts, founded by John Taylor, announced that it was closing shop. The fund has lost 15% this year, and has suffered through a succession of bad years which have plummeted its asset base from $12 billion in 2009 to $661 million now. CNBC’s Lawrence Delevingne reports that the San Francisco pension fund recently made the decision to redeem the $450 million it had invested with the currency trading hedge fund. The flagship FX Global Currency Program has lost 3.11% in 2012, and was down 14.5% in 2011. The fund is down 13.9% through August this year.
Quant funds shut down one after the other
The all around loser this year has been managed futures trading—the index is down -7.26% according to Credit Suisse Group AG (ADR) (NYSE:CS), whereas HFRX Macro/CTA Index is down -2.7%. Credit Suisse Global Macro has managed to gain only +0.66% in the first eight months of this year. The commodity trading and managed futures category appears to be the one that has seen the most hedge funds shutting down because of lackluster performance.
Another big hedge fund of the past, Clive Capital, decided to shut down business after a particularly rough year for commodity traders. Assets of London-based Clive Capital have slipped from a high of $5 billion to $650 million this year. The fund communicated to investors last month that it was wrapping up business due to lack of investment opportunities. The fund will be returning back 98% of investor capital by the end of this month. The flagship Clive Fund has returned -9.05% in this year after a big loss of -4.6% in the last month through September 18. Clive was down 8.8% in 2012 and has lost 9.9% in the previous year.
Yesterday another quant fund, Sweden-based Density told Reuters that it was shutting down after several tough quarters. Density is run by Brummer & Partners’ Nektar unit, the fund uses trend following strategies which have become difficult to navigate these days. Density’s performance was down 14.9% in the first three quarters of 2013. Manager of the Density fund said that we don’t have the resources to fight anymore as conditions in the CTA space have gone from bad to worse. Density would be wrapping up by the end of this month.
A newbie hedge fund manager, Jennifer Fan, raised $700 million for her commodities fund Arbalet Capital, last year. However continued redemptions coupled with patchy performance have brought the fund to an early demise. Arbalet was down 6% through June this year, and AUM has gone down to $200 million.
Karsch closes fund, moves to a new chapter
Michael Karsch’s Karsch Capital, a long/short equity hedge fund, also intimated to investors that it was closing shop. However Karsch’s reason was not poor performance, the value investor is moving on to a different field. Michael Karsch will be opening a consulting firm and will probably count the likes of Stanley Druckenmiller among its clients.
Karsch’s long/short equity hedge fund has $2 billion under management and had returned 7% through August this year. The fund would be returning all client capital till January of next year. Karsch has previously worked at Soros Fund Mangement and Chieftain Capital.