Hedge fund London Diversified Management has seen more than 90% of its assets evaporate over the past two years, as investors fled its flagship and its faltering performance.
London Diversified managed just US$300 million at the end of last year, according to Financial News, down from US$5 billion at the beginning of 2008. But thanks to aggressive cost-cutting—and the departures of 13 partners since September 2008—the firm managed to turn a profit last year, despite the fact that it hasn’t collected a penny in performance fees since the middle of 2008, Financial News reports.
London Diversified’s flagship plummeted 28.1% in that year. But unlike many of its peers, it failed to join in the double-digit rally that pushed many hedge funds above their high-water marks last year, when London Diversified returns only 4.9%. It was up 1.2% in January, according to FN. A smaller fund managed by the firm did even worse, dropping 33.3% in 2008, rising 4.4% last year and dropping another 1.3% in January.
Still, the firm’s assets are back up to about US$500 million, including US$200 million in a managed account. London Diversified posted a £31.9 million profit on £34 million in revenue in the year ended Aug. 31, 2009, thanks to slashing administrative expenses to just £2 million. In the previous year, the firm earned £ 115.5 million on £141 million in revenue.
In the 14 months, London Diversified has cut ties with partners Argyris Bikos, Steven Fage, Adrian Rates, Scott Brown, Alireza Satrap, Marcus Browining, Richard Owen, Elizabeth Fitzgerald, Andrew Clare, Shamik Dhar, Carmine Di Conno, Daniel Gabay and Jeremy Gelber. It has not hired a new partner in almost two years.