Orange Capital is the latest hedge fund to close shop. Rob Copeland and Liz Hoffman of The Wall Street Journal first reported the news stating:
The activist hedge fund Orange Capital is shutting down, the firm said, one of the first big shakeouts after a turbulent opening month of the year for markets world-wide.
Orange, co-founded by former Citigroup executive Daniel Lewis, will notify investors in writing in the coming days that it plans to hand back its remaining funds, amounting to about $1 billion.
The hedge fund claims that the reason for the closure has to do with a changing market (other funds have claimed this including Nevsky Capital), however, there may be other reasons related to the closure that have nothing to do with market environment nor performance, but we will leave it at that….
ValueWalk has obtained a letter from Orange Capital CIO Daniel Lewis – readers can find an exceprt below.
We are proud of Orange’s successful track record spanning over ten years. As you well know, much has changed in the global markets since launching Orange in 2005. Shorter duration hedge fund assets have grown at a rapid pace even as market liquidity has deteriorated, particularly in the high yield and distressed debt markets.
We believe that credit investing through traditional, liquid hedge fund strategies will prove challenging for investors as the credit cycle turns. This includes our own hedge fund structure. Part of our decision rests on our belief that it would not be in your best interests to purchase a meaningful position in corporate debt in this vehicle, which traditionally has been a very important part of our investment mandate. Given the significant changes in the global investing landscape we concluded that after ten years of active management it would be best to reassess our investment process, time horizon, and structure outside of the existing demands of day-to-day portfolio management.
On a personal note, it is extremely difficult to step back from managing your capital and from the firm Orange has grown into over the last decade. This decision will have an immediate impact on our employees, and I am actively working to help them transition….
