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Epic Limited Partnership - Canadian mid-cap

2008-10-29

Count of distinct funds: 1
Capital base: $300M at peak
Loss: $200M left (at last check; selloff not complete)

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stories: theglobeandmail.com

This Canadian hedge fund run by Epic Capital Management is the main fund at that outfit. As they were hit by redemptions, they made a decision to shut down, as the fund would mostly be left with undesireable and illiquid "silt" after selling off the "cream" to meet the redemptions. Additional details follow:

If Epic investors approve the closing, they should get about 80 per cent of the money they are entitled to by early next year, and the remainder as Epic unloads tougher-to-sell investments, Mr. Fawcett said. The firm, which had three partners and six employees, is letting five workers go.

Epic had already sold most of its stocks and moved 75 per cent of its assets into cash.

Regarding performance:

Epic's performance is in line with many of its peers, suggesting other funds may not be far behind. More than a dozen Canadian hedge funds are down over 40 per cent this year - meaning they have had a bigger drop than the country's benchmark stock index.

The declines have undermined the rationale for investing in hedge funds, which were pitched based on their supposed ability to generate positive returns in any market.

Epic's move also affects the $35-million Arrow Epic Fund, which it runs as an external manager for Toronto-based Arrow Hedge Partners Inc. That fund, which plunged 45 per cent this year as of last Friday, is also being wound down.

These points suggest to us there will be more of this.

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Important: This fund is on our list of hedge funds that have "imploded" (see also ailing lenders). However, please note that "imploded" is a somewhat subjective. The "imploded" list contains hedge funds (or other unregulated and autonomous speculative investment funds) which have gone through some sort of permanent adverse change. This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid mark-downs in net asset value; or abnormal "bail-out" by corporate parents or peers in order to avoid write-downs and provide liquidity. The funds are of any type and sector.