Full List of the ailing/watch list Funds:
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2008-07-01:
Ritchie Capital Management
- 1 fund(s) impacted
Estimated base capital: $4B (at peak in 2005)
Estimated loss: down to $2B now (loss vs. redemptions unknown)The troubled fund outfit run by A.R. Thane Ritchie has barred the door to withdrawals, reports Reuters (channeling the WSJ). From the article:
Ritchie told the Wall Street Journal that keeping his investors' money in the fund is the best move right now, since the alternative is to sell securities at "fire-sale prices".
I'm sure some of those investors are thinking they'd like to fire-sale some assets before competitors start doing it.
If Ritchie doesn't go looking for trouble, trouble certainly seems to find it. Just in the past year the fund has been involved in a bevvy of convoluted scandals:
- Ritchie was fined $40M by the SEC for late-trading. Ritchie had gone as far as forging orders to back-date them to before 4pm. (The late trading took place between 2001 and 2003, at least as far as the SEC knows).
- Two other fund outfits, Benchmark Plus Management, and Sterling Asset Management sued Ritchie over its management of a fund (Ritchie Multi-Strategy Global fund) in which all three invested.
- Ritchie then counter-sued Benchmark for various aspects of breach of contract, which prompted the latter fund to drop its own case. (We don't know what happened to Sterling).
- Ritchie sued Coventry First, an insurer, over fraud in investments undertaken with Ritchie. Claiming $700M in damages, Ritchie invoked RICO. Coventry was already fending off a suit begun by New York Attorney General Eliot Spitzer. Still, Coventry considered the Ritchie suit "a cheap publicity stunt."
- Oh, we're not done yet. An investor in the above Coventry deal through Ritchie, Huizenga Managers Fund, sued Ritchie over its management of the insurance fund, saying the fund was misrepresented to them, and may be a total loss (Huizenga is still waiting to get its $10M back).
One of these articles also points out even earlier Ritchie drama:
The Geneva, Ill.-based hedge fund has been awash in bad news for much of the last year, shuttering its energy hedge fund at the same time Amaranth Advisors went under, spinning off its global macro fund and selling its flagship multi-strategy fund. Now, the firm is accusing a life insurer of fraud, seeking over $2 billion in damages.
Good grief.
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2008-06-12:
Windmill Management (SageCrest funds)
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art, property, lawsuit lending
- 2 fund(s) impacted
Estimated base capital: $1b+ in SageCrest II, the largest fund (as of last year)
Estimated loss: SageCrest II reportedly down by half; principal loss vs. withdrawals unknownOutside coverage: story
This fund group came to our attention due to a lawsuit regarding alleged shady (if not fraudulent) activities:
A US hedge fund manager facing a lawsuit for blocking withdrawals is now being accused by one of its long-standing investors of “siphoning off” money.
Windmill Management, which runs the SageCrest and SageCrest II funds specialising in loans for art, property, and personal injury lawsuits, was sued this week by Westerly Capital on behalf of other investors in its first fund.
The case is unusual in the world of hedge funds, where claims of deliberate wrongdoing by managers are usually picked up first by regulators. Investors are often reluctant to reveal their losses in public for fear of embarrassment, keeping them out of the courts.
The FT article has more about Windmill and the situation it is in with its funds:
More about the fund and the situation it is in:
The first SageCrest fund is relatively small, and the lawsuit is likely to be more of an annoyance to Windmill at a time when it is struggling with an almost halving of the value of the second fund, which reached almost $1bn under management last year.
But it could prompt further concerns among investors in the larger fund, many of whom have already complained about a block on withdrawals and big falls in value. Last month Wood Creek Capital Management, a US fund of hedge funds, sued Windmill for $5.8m it claimed had been promised in repayment but had never arrived. The fund was also pulled into a tangle of legal actions in New York over loans to buy art where Christie’s accused a gallery of trying to rig an auction.
SageCrest II has sold many of its assets at a steep discount to raise cash partially to repay loans from Deutsche Bank and Bear Stearns, and has been trying to secure a $150m emergency loan from fund manager Fortress Investment Group.
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2008-04-21:
Clinton Group Multi-Strategy Fund
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multi-strategy
- 1 fund(s) impacted
Estimated base capital: $400 million (end of 2007)
Estimated loss: 45% value, 80% assetsOutside coverage: story
Not sure how we missed this one but here it is. Looks like Clinton group is in a variety of businees we really would not want to be in these days:
Multistrategy was down 45% in the first quarter due to bad bets on mortgage-backed securities. Total assets are down by almost 80%—just $90 million from $400 million on New Years Eve—as investors have fled the sinking fund. Clinton Group’s hedge fund assets have fallen from $5.5 billion five years ago to just $600 million today. The firm also manages $7 billion in collateralized-debt obligations and $400 million in private equity.
But the firm's irrepressible founder is not deterred, and lucky for him, there aren't any consequences in this ball game:
Despite the setbacks, firm founder George Hall is apparently not discouraged, as he hopes to raise $150 million for a new fund, Bloomberg News reports. The new vehicle will invest in stocks and asset-backed bonds, featuring annual, as opposed to Multistrategy’s quarterly, liquidity.
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2008-04-06:
AQR Capital Management
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quantitative strategies
- 3 fund(s) impacted
Estimated base capital: $11B (firm-wide)
Estimated loss: down to about $8.6B now (firm wide; mid-Feb '08)A number of AQR Capital Management's funds (possibly all of them) could be called "ailing" these days. As FinAlternatives reported (in mid-Feb.), Absolute Return was down nearly 15%, and a more leveraged version of the fund was down about 25%; and the Asset Allocation Fund was down about 16%. The latter fund was the basis for one of Goldman's 401(k) options, the Global Relative Value fund, which was recently shuttered after losing 21% in 2008.
FinAlternatives has this background on the fund and its current condition:
The Greenwich, Conn.-based firm, founded by ex-Goldman wunderkind Clifford Asness, has been one of the funds hardest hit by the market volatility set off by the subprime mortgage crisis. The $11 billion firm’s flagship was done almost 15% through the middle of February, after losing 12% last year.
Their Feb. 22, 2008 article gives $8.6B as the remaining assets under management at the firm; a drop of more than 20% in six months time.
If you have more information on AQR, please drop us a line.
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2008-04-05:
Polygon
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activist
- 1 fund(s) impacted
Estimated base capital: GBP4 billion ($8B)
Estimated loss: down 4% on the yearOutside coverage: story
Today we must regretfully continue the preponderance of ailing 'p'-named hedge funds (e.g. Plexus, Pardus, Platinum...) with Polygon.
Skittish over market turmoil and a 4% loss so far this year, the activist funds' investors have lined up for withdrawal. Polygon had established a "stacked gate" system for this—which would allow only a limited number of investors out at once, and require the rest to wait. But the hedge fund wisely realized that this system would simply encourage investors to put their requests in early, so as not to be stuck at the back of the queue. They've abandoned that plan in favor of offering a new class of shares "without any gate".
It should be interesting to see how popular this option proves to be. If most investors opt out anyway, then they must be worried about performance (and market conditions) more than about a run on the fund.
We will endeavor to keep you posted.
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2008-04-03:
Plexus Partners
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credit arb.
- 1 fund(s) impacted
FT breaks the story:
The $1.4bn (£704m) flagship hedge fund of London’s Plexus Partners has lost more than a third of its value this year after arbitrage trades in the credit markets went spectacularly wrong. Plexus, run by Dermot Keane, the former Goldman Sachs trader, fell by slightly more than 35% on perverse moves in the “basis trade”, a popular arbitrage between the price of derivatives and the underlying corporate credits, investors said.
FinAlternatives reports ``The firm has reportedly sold off hundreds of millions of dollars in convertible bonds in an effort to stave off skittish banks calling in its loans.'' That's never fun.
Details are sketchy; if you know more, please contact us.
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2008-03-31:
Pardus Capital Management
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Activist investment firm
- 1 fund(s) impacted
It has been reported that Pardus Capital Management has suspended redemptions:
Pardus Capital Management LP has suspended investor redemptions because the $2 billion hedge-fund firm has been hit by market volatility this year, a spokesman said Monday.
Pardus is an activist investment firm that takes big positions in a small number of companies and often pushes for strategic changes.
...
"Because our investment portfolio has always consisted of a small number of high-conviction, capital-structure agnostic corporate positions in which we have taken a long-term investment perspective, the funds have been disproportionately affected by recent market volatility," a spokesman for Pardus said in an emailed statement.
"The actions we have taken will allow us to protect the funds and their investors from the external short-term pressure of the broader financial markets and focus on realizing value on our portfolio companies for investors over an extended period of time," he added.
Humorously, Pardus' spokesman spun the redemption suspension as as "good news" for the companies in which Pardus has positions. I guess those companies should be happy to hear that Pardus is having to take evasive maneuvers to ensure they don't run out of capital. You know, maneuvers like liquidating positions.
The WSJ reports that Pardus owns positions in Delta and United Airlines, and has been trying for months to get the two to merge, to no avail. Both positions are down significantly. Pardus is also down big time (about 40%) on French auto parts company Valeo SA, on a 12 million share ($450M) position.
Pardus apparently does not use leverage. No matter. The WSJ further states on the selloff process:
The person close to Pardus said the firm will slowly sell some of its positions over the next two years to satisfy investor redemptions.
Some of that selling has started: Pardus late last week sold more than 10 million shares of London travel company Thomas Cook Group PLC, which was created last year by the merger of Thomas Cook AG and MyTravel Group PLC.
Pardus still holds more than 34.9 million shares of Thomas Cook, but that's down from 57.3 million shares in January. During the fourth quarter, Pardus sold all 12 million of its shares in another holding, struggling Ford Motor Co.
We've seen this dynamic before and we'll see more of it: funds will sell off their winning positions first, to meet redemptions, effectively bailing out the losing ones. This will drag down all securities and assets in all markets.
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2008-03-31:
Tisbury Capital
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M&A, event driven
- 1 fund(s) impacted
Estimated base capital: $2B
Estimated loss: ?Outside coverage: story
The FT confirms what we had been hearing about Tisbury being under distress:
Investors in Tisbury Capital are trying to withdraw $1.4bn of the London hedge fund’s $2bn of assets under management after the fund abandoned an ill-fated US venture. The scale of the withdrawals will end Tisbury’s reputation as one of London’s bigger merger arbitrageurs. Tisbury, run by former Citadel trader Gerard Griffin, has broken with hedge fund convention by dropping a 10% cap on withdrawals to allow investors to get their money back quickly, as long as they agree to retain their share of $300m of hard-to-sell assets.
Interestingly, a source sent us volumnous information about Tisbury in early March which we could not confirm. The extent of the withdrawal requests seems spot on, however, the "office politics" aspects may or may not be true:
Tisbury Capital is in danger of imploding. After a period or almost 8 months of under performing and losses investors have lost patience and have made notification for redemptions for nearly half the $2bn invested for a March withdrawal. Further notices have been made for June withdrawal and these are rumoured to take the fund from a peak of $2.4bn down to around $0.5bn.
The problems started as key personnel started to leave Tisbury, Anna McCutcheon, Emanule Minotti, Stephane Carnot and Adrian "Dr" Fox-Murphy. This left Gerard Griffin alone to manage the fund through the turbulent times. The fund took some big losses after the departures in stocks such as ABN Amro, RBS and Clearwater and the fund increased its turnover as it chased bigger and riskier bets. Through these times investors found it difficult to get through the Gerard Griffin and felt ignored building distrust. It is understood that his style is officially risk arbitration and event driven, but increasingly became day trading and betting, with little attentions paid to his analyst. The year finished down 3% after peaking in May at about 11% up, a dismal –14% H2 performance.
In January Tisbury suddenly closed the Boston Office making all the employees there redundant, it also made 4 redundancies in the London office after the fund had one of its if not the worst month in history losing 687bps. This was the final straw for us investors and the redemptions grew to preserve some the investment before the fund implodes.
The rumour is that main partner and fund manager Gerard Griffin is trying to save face before Tisbury's eventual implosion and looking to sell the funds under management on. It appears that GLG will be acquiring the fund and taking Gerard Griffin into their system.
It will be interesting to see how Gerard Griffin copes when there is someone monitoring and realising his true investment style and how long he continues managing the funds he has rumoured to sell to GLG. GLG is expected to announce the purchase this coming week.
Of course much of this information is hearsay (and we did not find any confirmation of a looming GLG buyout), but it looks pretty accurate to us. The source provided some further details:
The fund's strategy is event driven.
There is just the one fund of Tisbury, the other funds are simply sub funds categorised by investor type, the performance and investments are in the single main fund. The redemptions are large enough, ie could reduce the fund to around $600m and with Tisbury's overheads and new office in Old Burlington Street, the economic viability of continuing will be questioned.
I think Anna left around June 2007. Stephane left shortly after and was reported in the FT as Stephane was under FSA investigation. The risk control person Adrian Fox, left in Autumn and Emanuele left around the same time. The Boston office closure was reported in the FT on Feb 11th 2008.
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2008-03-28:
Platinum Grove Asset Mgmt.
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fixed income relative value
- 1 fund(s) impacted
Update, 2008-04-11:
The March figures are in :
Platinum Grove, which the Nobel Prize-winning Scholes founded in 2000 with other alumni from defunct hedge fund Long-Term Capital Management (LTCM), suffered an 11.37 percent drop for its domestic fund and 10.72 percent for its offshore sister fund, according to a letter the fund sent to investors on April 7.
However the situation is apparently better (so far) in April:
But a person familiar with the company's performance said stabilizing fixed income markets are helping the firm recover, and the funds were up 2.6 percent in April as of last Friday.
It is said that investor redemptions and margin calls are still not a problem.
Original Writeup, 2008-03-28:
FT has a brief synopsis of the woes of this fund:
Others hurt by Japanese price moves include Platinum Grove, the $5.5bn Rye Brook, New York, hedge fund set up by former Long Term Capital Management co-founder Myron Scholes, which fell about 7 per cent, according to investors.
Ah, another LTCM alum—this one a Nobel laureate. Aside from the LTCM thing, it does not exactly comfort us how far Scholes' lauded creation, the Black-Scholes option pricing formula, may diverge most from reality when it really matters the most (when the excrement hits the oscillator). But then again, truly successful investors with a nuanced understanding of markets and human society (think Buffett or Soros) don't need anyone to give them awards.
The WSJ article (dated later) has the fund down 13% on the month; 10% on the year. If both sets of numbers are true, then in one week, Platinum Grove's loss on the month almost doubled.
But as far as we know, Platinum has not halted redemptions, so we classify this one as a mere "watch closely".
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:
Global Alpha and Global Equity Opportunities(Goldman Sachs)
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Quantitative funds
- 2 fund(s) impacted
The Financial Times has reported that Goldman Sachs has reclaimed "90 per cent of the $2bn it used to bail out" their Global Equity Opportunities Fund. The withdrawal came at the end of February. Per FT:
Goldman withdrew $1.8bn from its Global Equity Opportunities fund at the end of February, its first opportunity under a lock-up agreement made when it invested in August, according to people familiar with the quantitative, or computer-driven, fund. It wrote to investors last week to explain its decision but declined to comment on Wednesday
Eli Broad, the US billionaire, has also withdrawn the money he invested in August to help bail out the fund.
Mr Broad joined hedge fund Perry Capital and others in putting in $1bn to help rescue the fund.
The withdrawals comes after investors abandoned GEO and two other Goldman quantitative hedge funds, one of which – North American Equity Opportunities, or NEO – was closed earlier this year.
North American Equity Opportunities has been reported as imploded.
Further to the article, "GEO" has gone from around $5 billion in net assets to $1.2 billion now.
Regarding Goldman's Global Alpha fund, FT reports their net assets have diminished from $10 billion to $2.5 billion. Some part of this reduction is due to a loss of 40% in 2007.
Despite the troubles at GEO and Global Alpha, the funds continue on in hopes of making future profits though no fees will be earned until the funds have made back their losses. One wonders how long that will take.
Original Ailing 2007-08-09 — Global Alpha Fund:
Global Alpha fund
Forbes reports that Goldman Sachs' nine billion dollar Global Alpha quantitative hedge fund was down 16% for the year:
It was widely reported in the media on Thursday that Global Alpha, a mega $9 billion hedge fund in Goldman's asset management group, was down 16% for the year. According to people familiar with the matter, the fund has suffered the most in the last few months, when the markets were especially volatile.
...
Unlike the typical hedge fund, Global Alpha is a quantitative fund, meaning that its trades are determined by computers and convoluted mathematical models. Some quant funds are completely computer dictated, while others spew out investment options for a human trader to veto or accept. When the markets follow the laws of probability, quantitative hedge funds can cash out big. Traditionally, quantitative funds are considered low-risk instruments because they use historical benchmarks to analyze trades.
...
Back in its heyday, Global Alpha was one of the bank's best-performing jewels. In 2005, the fund boasted a near 40% return. However, like humans, computers are not perfect--nor can they predict the future. Global Alpha was also engineered to place big, risky bets--one unexpected swing in the market could take a major bite out of the fund. After years of consecutive growth, the fund started to wobble--in 2006 it fell 6%.
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2008-03-24:
Carrington Capital Management
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mortgage-backed securities
- 1 fund(s) impacted
Estimated base capital: $1B
Estimated loss: ?Outside coverage: story
Carrington Capital, a hedge fund co-founded by the illustrious New Century Financial Co., presumably to make sure the privilege of not only originating but also owning toxic mortgage securities wasn't completely monopolized by others, finds itself in trouble:
Carrington Capital Management, a $1bn hedge fund specialising in mortgages, is trying to persuade its investors to lend it up to $200m to replace bank loans, in the latest sign of concern about banks pulling credit lines to hedge funds.
And shocked we all are. The article continues:
Carrington, part-owned by failed US subprime lender New Century, has offered investors an 18 per cent interest rate on new preferred shares it plans to issue. The fund said it was concerned about short-term reverse repurchase, or "repo", financing, although it told investors it maintained good relations with its remaining lenders.
...
Carrington has frozen redemptions by its investors. It said it would focus on paying off debt before returning any cash, and that it missed a planned repayment at the end of last year.
Looks like this one has a bright future. At least, if you think so, they'll be happy to take your money. Now there, one at a time, all you "accredited investors"!
Combine this news with revelations in litigation that 'AAA' MBS has lost as much as 30% of its value and subprime as much as 95%, and you wonder why these guys bother.
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2008-03-22:
MKA Capital Advisors
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?
- 1 fund(s) impacted
Estimated base capital: $500M
Estimated loss: ?Outside coverage: story
We know little about this fund, but BusinessWeek includes them in a short list of funds suspending/limiting redemptions (see link above).
This appears likely to be their web site; if so, they may not technically qualify as a hedge fund. But if not they are likely independent private equity, potentially exposed to similar run-on-the-bank dynamics.
If you know more about MKA, please let us know.
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2008-03-22:
Alcentra European Credit
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buyout credit fund
- 1 fund(s) impacted
Estimated base capital: $500M
Estimated loss: ?Outside coverage: story
Mentioned in a BusinessWeek article on March 5th (linked above) as having suspended or limited redemptions.
This page describes Alcentra and lists a number of CDOs and CLOs which presumably they created. Alcentra is briefly described thusly:
Alcentra’s European team was formed through the acquisition of Barclays Capital Asset Management Limited (BCAM) a wholly owned subsidiary of Barclays Bank Plc. Alcentra Europe is a long established investor in the European high yield bond market and one of the largest institutional investors in the European leveraged loan market. Senior members of the loan product sourcing team have experience within the European markets.
Take a look at the CDO/CLO list. There is a lot of stuff in there that looks pretty scary.
That's all we have. Definitely let us know if you know more.
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2008-03-22:
Pursuit Capital Partners
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fixed income
- 1 fund(s) impacted
Estimated base capital: $650M
Estimated loss: ?Outside coverage: story
News of redemptions suspensions and/or limitations at this fund comes from BusinessWeek (linked above), which says little more than:
Pursuit Capital, which invests mainly in debt backed by mortgages, corporate loans, and aircraft leases, earned 12% in 2007 and is up 1% since January. But early this year, nervous investors started asking for their money back. Rather than selling assets into a falling market, the managers decided to block redemptions to prevent a run on the bank. "They are doing it to protect investors," says Michael Burg, a lawyer for Pursuit.
If you know more and the latest, please drop us a line.
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2008-03-22:
GPS Partners
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natural gas infrastructure
- 1 fund(s) impacted
Estimated base capital: $1B
Estimated loss: ~15% in Jan.Outside coverage: story
Though information is scant, the above BusinessWeek article mentions that this fund has suspended or limited redemptions. The article says:
GPS Partners, a Santa Monica (Calif.) fund run by Brett Messing, the brother of actor Debra Messing, dropped nearly 15% in January, according to two investors. After more than 15% of investors ran for the door, the fund imposed a "gate" in February that limits withdrawals.
If you know more, please let us know.
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2008-03-27:
JWM Partners LLC - Relative Value Opportunity fund
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relative value
- 1 fund(s) impacted
Original Writeup, 2008-03-19:
The WSJ has a story on Meriwether's woes, which notes:
Mr. Meriwether's recent troubles partly stem from borrowing. His bond fund had $14.90 in borrowed money for every $1 in equity at the end of February, according to the March 18 letter. Although far lower than at LTCM, the fund's risk level, which includes leverage, was still too much for this year's volatile environment, he and his fund managers have acknowledged in conversations with investors.
Mr. Meriwether marketed his bond fund as a lower-risk version of LTCM's core strategy, of identifying the next financial crisis and profiting from it by buying securities its managers consider underpriced. Investors were told that the firm would aim to keep borrowings below 15-to-1 even during less-volatile times. Mr. Meriwether and his colleagues promised to behave more conservatively, rebuilding their reputations with consistent returns. His bond fund hasn't had a money-losing year.
Unlike in 1998, Mr. Meriwether isn't a central player in the current crisis. His firm has about 70 employees, most working in LTCM's former offices in Greenwich, and some in London. Some LTCM investors invested in JWM when Mr. Meriwether started the new firm.
Sounds like some of these investors were just asking for it. The WSJ has additional data:
JWM's Relative Value bond fund, launched in December 1999, has lost 28% this year through last week after notching a 5.6% return in 2007, according to people familiar with the fund. The recent losses further weigh on the fund's average annualized return since inception of about 7% through February 2008. The Lehman Brothers U.S. Aggregate Index, a measure of investment-grade bond performance, has returned an annualized 6.5% during that period.
JWM's bond fund, which seeks to profit from price discrepancies among stocks, bonds and other securities, trails the 9% average annualized gain of hedge funds world-wide during that period, according to Hedge Fund Research, a Chicago research firm.
Moreover, Mr. Meriwether's five-year-old macro fund, JWM Global Macro, which invests in broad trends through currencies, commodities, stocks and bonds, was down 6% through February after falling 5.6% in 2007. The fund has gained about 5.7% per year, on average, since it began trading in 2003. That record means the macro fund, too, trails its peers, which have gained twice as much a year, on average, during the same period.
JWM's losses this year have pared the bond fund's assets to less than $1 billion from its peak of more than $1.3 billion, according to people familiar with the situation. The macro fund has shrunk by at least half, to about $350 million. JWM managed about $2.3 billion in total assets at the start of 2008.
The article states that Meriwether has been able to meet all margin calls thus far.
Original Writeup, 2008-03-19:
Bloomberg reports that
Meriwether's Relative Value Opportunity fund was hurt as bond managers such as Peloton Partners LLP and Carlyle Capital Corp. were forced to sell securities to meet margin calls, said the investors, who asked not to be identified because JWM doesn't publicly disclose returns. The Greenwich, Connecticut- based firm, which is selling holdings to reduce borrowings and lower risk, didn't have any loans called, they said.
``There's been a lot of forced de-leveraging,'' said Benjamin Sarly, head of marketing at Sanno Point Capital Management in New York, a relative-value credit fund.
The article states that fund has about $1B in capital but is down about 24% this year. Ouch.
For those not in the know, Meriwether was one of the principals in the Long Term Capital hedge fund, which imploded in 1998, requiring a Fed-orchestrated bailout. Meriwether subsequently won a lifetime achievement award, and as today's news makes clear, he was obviously not run out of the business.
Small wonder, then, that his "innovation" of massively-leveraged hedge funds which fail to truly account for systemic risks has become so popular. If this is failure, then its hard to see what doesn't amount to a personal success in the hedge fund industry. Heads, you win, tails, your investors lose (and you get lifetime achievement award, and repeat business).
That's it for our ranting. The Bloomberg article has more background on this type of fund:
Relative-value funds try to profit from price changes between related bonds. They rarely make outright bets that a specific bond will rise or fall. Investors in these funds expect to make about 1 percent a month.
Basically, fixed income arbitrage. Generally speaking this is the same sort of crap LCTM went down for (also in an un-anticipated environment of credit crunch, incidentally).
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2008-03-12:
ING Diversified Yield, Regular Income
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CDOs, etc.
- 2 fund(s) impacted
ING has been forced to suspend withdrawals from two finds after a minority of nervous investors headed for the exits. The Bloomberg article cited above has more:
Withdrawals from the ING Diversified Yield Fund and the ING Regular Income Fund were halted to protect investors, Marc Lieberman, chief executive officer of ING (NZ) in Auckland, said in an e-mailed statement. About NZ$520 million ($417 million) was invested in the two funds at the end of February.
Since August, rising defaults on U.S. subprime mortgages triggered a global sell-off of CDOs, which are fixed-income securities backed by the loans. The value of the Regular Income Fund fell 25 percent in the year ended Feb. 29 while the Diversified Yield Fund dropped 22 percent, according to the company's Web site.
ING claims "most" of the fund contains higher-quality assets, with only 10% in subprime and 6% in CDOs. Displaying a common paradox, ING is planning on selling some of the higher-quality holdings to meet withdrawal request, which of course will push the prices for those assets down, explaining much of the market action we are seeing. ING like does not want to liquidate the CDOs or subprime because it is hoping the values will come back—or perhaps the quotes on those assets are no so low, they would not be enough to meet investor withdrawals.
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2008-03-12:
GO Capital Global Opportunities Fund
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Event, European equities
- 1 fund(s) impacted
Estimated base capital: $881M (EUR 570M)
Estimated loss: 15% or so on the yearGO Capital Global Opportunities is yet another fund forced by the turmoil to block redemptions. We're not sure if this is in response to or a cause of the fund's distress, but the Bloomberg article points out that a number of European shares the fund had major stakes in dropped precipitously on the exchange.
On the fund's performance, the article notes:
The fund, which targeted returns of 15 percent a year, is down 7.7 percent through the end of February, according to net asset value figures on its Web site. It gained 2.1 percent last month, reversing a 9.5 percent drop in January. The fund rose 3.3 percent in 2007, 22.4 percent in 2006 and 69 percent in 2005.
That would mean the fund is down about 15% this year. In fact, based on the above record, this fund doesn't seem very "hedged" at all. But what do we know?
GO is Amsterdam-based and was founded by Frans van Schaik in 2000. He says:
the fund is not leveraged and not facing margin calls. The fund, which bets both on rising and falling prices, has assets of about 570 million euros ($881 million).
If this is true, van Schaik may not be an imminent implosion. However, unless the equity markets come back (and this appears unlikely), share holders of GO may continue to exit, making it infeasible to continue the fund.
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2008-03-06:
Highland Capital Management
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Leveraged loans
- 2 fund(s) impacted
Estimated base capital: $40B (probably goes beyond the hedge funds)
Estimated loss: down 10-15% in janThe Texas-based highland is in choppy waters, but has not yet gone as far as suspending redemptions, as far as we know. The FT article says:
Like other investors, it has been hammered by the falling prices of leveraged loans. Highland’s main hedge funds, investing in distressed debt and other credits, were down 11.5 per cent to 14 per cent in January. While it is not clear how it fared in February, Highland’s recent performance contrasts with gains of 30-40 per cent in 2006 and 2007.
As a result, Highland executives, led by co-founder Mark Okada, are engaged in an intense dialogue with investors to discourage them from withdrawing their money.
...
Mr Yang said redemptions so far “haven’t been significant” and Highland is seeing inflows as well. Highland officials insist that the size of their holdings remains a source of strength, pointing out that $25bn of their loans are in closed-end funds that do not face redemption pressures.
And more on the general situation:
Highland’s fortunes underscore the rapid changes on Wall Street. At the peak of the buy-out boom, private equity firms worked to keep Highland out of deals because of its reputation for tough tactics. As the credit squeeze worsened, the same funds welcomed Highland’s cash. Now, market participants are monitoring Highland’s health because of its prominence in the leveraged loan market.
Question is how long the "storm" will last in leveraged loans. If it is, as we think, an permanent "gap down", Highland may have to ultimately book losses or shut down funds. Risk premiums on leveraged loans were simply unrealistically low, and that condition is unlikely to come back. Ever.
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2007-10-10:
Ellington Capital Mgmt. (certain funds)
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mortgage-credit funds
- 2 fund(s) impacted
Update, 2008-03-05:
BusinessWeek has also mentioned this fund group, though hasn't said much about it. The implication is they are still in distress; which isn't surprising for a mortgage-credit fund (spreads have only worsened since October).
First Listing, 2007-10-10:
We have preliminary information via The NYPost (link above, October 6th) on two funds at Ellington which have suspended withdrawals. The claim is that there have not yet been an abnormal level of withdrawals and that there is plenty of capital to meet a large level of withdrawal requests; but due to uncertain valuation of MBS securities, withdrawals have been temporarily disallowed.
From the article:
The fund's redemption suspension covered two mortgage-credit funds with about $1.9 billion in assets between them, according to the investor letter from Michael Vranos, the fund's general partner.
According to the letter, which was obtained by The Post, Ellington's move came after liquidity and value data provided by Wall Street's mortgage-bond desks at the end of September for the bonds in the portfolios varied so widely that Vranos and his colleagues could not assign a fair value to them.
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2007-10-10:
Golden Key Ltd.
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SIV (incl. MBS)
- 1 fund(s) impacted
Estimated base capital: ?
Estimated loss: ?Outside coverage: story
We have this SIV fund on watch as its restructuring is pending. Some details on its predicament (from Oct. 4 2007):
Golden Key, based in the Cayman Islands, was set up to raise money in the short-term debt markets to invest in bonds with longer maturities and higher yields such as mortgage-backed debt. Investors refused to buy notes sold by SIVs on concerns they included U.S. subprime securities.
Blackstone Group LP is seeking investors to help refinance Golden Key Ltd., the structured investment vehicle that was forced to sell assets to pay creditors.
...
Barclays Plc helped set up Golden Key two years ago. Golden Key is in talks with Barclays in London to resolve a dispute over the ``purported drawdown'' of funds set aside as a liquidity backstop, the statement said, without providing detail.
Standard & Poor's slashed some of Golden Key's debt ratings to high-yield, high-risk from AAA in August after investors refused to buy its short-term debt. The rankings were cut by as many as 17 levels to CCC.
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2008-07-28:
Queen's Walk Investment, Ltd. (Cheyne Capital Management)
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MBS fund
- 1 fund(s) impacted
Outside coverage: story
Details are thin on this UK-based fund run by Cheyne Capital Management (which also runs the imploded Cheyne Finance fund), but here is the key excerpt from the linked article:
Queen's Walk Investment Ltd., a fund managed by London-based hedge fund manager Cheyne Capital Management Ltd., said June 25 it had a $91 million loss in the year to March 31 in part because of subprime.
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2007-08-23:
Capital Fund Management
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Troubles with cash management (Sentinel)
- 1 fund(s) impacted
Estimated base capital: ?
Estimated loss: 27%Outside coverage: story
Financial Times has reported that the collapse of Sentinel has led to troubles for one fund of Capital Fund Management (Paris), Discus Master Fund. FT reports:
... Capital Fund Management, a Paris hedge fund, said it stood to lose 27 per cent of its assets as a result of the cash management firm's troubles. CFM said in a letter to 600 clients that its Discus Master Fund probably faced losses of $407m.
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2007-08-19:
John W. Henry & Co.
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"Long term trend following" in managed futures
- 7 fund(s) impacted
Estimated base capital: $2.8 billion (at peak in 2005)
Estimated loss: 40%+Recent events (especially the rally in the Yen) have accentuated a swan dive of John W. Henry's various funds (7 of 8 of them, according to the second article). Assets under management have apparently dropped from $2.8 billion at the peak in 2005 to around $500 million now.
The second describes Strategic Allocation Program as JWH's "flagship" fund, and suggests it was down at least 12% as of April. We're unclear on where it sits now. That article has extensive details of the Firm's difficulties due to what seems to be dwindling interest from its founder, who is now arguably more interested in professional sports franchise ownership.
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2007-08-19:
Campbell & Co.
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Quant. fund
- 1 fund(s) impacted
Estimated base capital: $11 billion
Estimated loss: 10-12% as of July 2007Outside coverage: story
This Towson, MD-based fund run by Terri Becks is said to be hurting as a result of the breakdown of the Yen carry trade, as well as the ensuing credit crunch in general. The "completely" computer-driven fund is down 10-12% as of the end of July, according to a source. The fund reportedly deals in futures, stocks, and bonds.
Once again, we cannot help but be amused as a fund claiming to be "hedged" for volatility is showing signs of sickness upon encountering some actual rough seas.
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2007-08-09:
Tykhe Capital, LLC
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Stat. Arb.; Quant. Long
- 2 fund(s) impacted
Outside coverage: story
According to the letter posted here, at least two of Tykhe's funds are down 17-31% as of Aug 9, 2008 month-to-date (we have no idea how much they are down year-to-date or since inception, if at all). The letter also "reassures" investors that the fund is down to less than 1x gross leverage (which by our figuring, means 31% total fund losses would be a deterioration of about 60% of equity after leverage—but we can't say what the total impact is without knowing performance prior to August).
If we hear more about how Tykhe is doing and how it reacts to these "challenges," we will post updates.
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2007-08-09:
Black Mesa fund
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Quantitative fund
- 1 fund(s) impacted
Outside coverage: story
MarketWatch broke the following story regarding "at least one very large fund" (or investment bank?) that has seen significant losses in recent weeks here:
Black Mesa Capital, a hedge fund firm that uses computer models to track down arbitrage opportunities, has told investors that at least one very large hedge fund or investment bank is liquidating "massive" trading portfolios, according to a letter the Santa Fe, NM-based firm sent to investors on Wednesday. That's causing disruptions and triggering losses among other so-called market-neutral hedge funds, Black Mesa said in its letter, a copy of which was obtained by MarketWatch on Thursday. "Clearly, something is amiss in the markets that few in our strategy, if anyone, have experienced before," Black Mesa wrote. The firm's hedge fund is down roughly 7.5% in August, through Aug. 7 and could be down as much as 10% since then, Black Mesa noted.
Update, Aug 14: A manager at the fund has written in to point out that the fund is still up for the year and to assure that it is in no peril.
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2008-08-03:
Second Curve Capital (various funds)
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Subprime
- 4 fund(s) impacted
Outside coverage: story
At least four funds managed by bullish subprimer Thomas Brown (prprietor of Bankstocks.com) are in trouble:
Four funds in the Second Curve portfolio are down between 38 percent to 42 percent in the year through July, according to investors who have seen the numbers.
The results reflect the travails of investing in the now-battered subprime lending sector, where dozens of companies have faltered in recent months and some have failed.
Second Curve's portfolio included such stocks as Accredited Home Lenders, First Marblehead Corp. Primus Guaranty Corp. and Ocwen Financial Corp., according to a regulatory filing in May 2007. All those stocks have slumped amid a fallout in the subprime sector.
...
Brown's funds include Second Curve Opportunity Fund International, which is down about 40 percent in the year through July. That comes after a mega-performance last year, when it was up 53.6 percent.
The Second Curve Opportunity Fund LP is down some 42 percent through July 31, 2007, but was up 54.3 percent in 2006, according to investors.
Ouch.
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2007-08-02:
Axa IM
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US MBS, with significant subprime exposure
- 2 fund(s) impacted
Outside coverage: story
This Paris-based capital manager has run into trouble with its two "US LIBOR Plus" funds. It says the funds are 41% exposed to the US subprime sector, and both fell 21% in July. To preserve investor liquidity and help staunch a firesale in the market, the fund is putting up its own cash, a very extraordinary step. The funds have about US$712m in total.
Amusingly:
Axa insists that the funds were not invested in subprime investments that have recently been downgraded.
Fweew... they must be safe then!
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2007-08-01:
Macquarie Fortress Investments Ltd.
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US MBS with subprime exposure
- 1 fund(s) impacted
Outside coverage: story
The Australian bank's $873m worth of funds "may lose up to 25%" and the outfit is being forced to sell assets to meet redemptions. Also noteworthy:
Fortress uses leverage of 4.5 to 6.5 times and allows individual investors with as little as A$5,140 ($4,350) to spend to buy the notes.
Gotta love the notion of a mutual fund run like a hedge fund.
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2007-08-06:
Frankfurt Trust
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Asset-Backed Securities Fund
- 1 fund(s) impacted
Outside coverage: story
Frankfurt manages funds for Germany's BHF-Bank, and stopped withdrawals from a fund after clients removed 20 percent of their money since the end of July amid concern about the U.S. subprime loan implosion. While this is technically a mutual fund, we're unclear on if leverage was used, and are keeping an eye on it (it's even worse if this stuff is surfacing in mutual funds).
More from the Bloomberg article:
The FT ABS-Plus fund, which includes residential mortgage- backed securities and collateralized debt obligations, halted redemptions on Aug. 3, the Frankfurt-based company said today. The 160 million-euro ($221 million) fund has a ``small exposure'' to subprime investments, spokesman Holger Ullrich said.
Stay tuned.
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2007-07-21:
Mariner Bridge
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MBS with subprime exposure
- 1 fund(s) impacted
Outside coverage: story
From the above article:
Mariner Bridge Investments, admitted to facing problems stemming from the subprime crisis. Mariner Bridge, which manages $302 million, cut the value of its $36 million in US residential mortgage-backed securities to 26 per cent below face value. Shares in Mariner Bridge fell as much as 11 per cent to $1.80 but closed at $1.995, off 2.5c.
"These investments have performed poorly," Mariner Bridge's chief financial officer, Karen McGregor, said - adding that 40 per cent of the mortgage-backed securities portfolio was in the subprime market.