Convexity Suffers First Negative Quarter In Two Years

May 17 2011 | 1:57am ET

Convexity Capital Management, headed by the former head of Harvard University’s endowment, suffered a loss in the first quarter, the Boston-based firm told investors.

Convexity, which remains the biggest hedge fund ever at launch, missed its benchmarks by 1.5%, Jack Meyer wrote to clients, Bloomberg News reports. It is the firm’s first negative quarter in two years.

“It’s been a while since we have had a negative quarter,” he wrote. “After careful consideration we have decided we do not like it. It will never happen again.”

“OK, ignore that last statement,” the joking Meyer continued. “Of course it will happen again. But we are confident that we can continue to add value over the long term and that these bumps in the road will be… well, just bumps in the road.”

Meyer blamed static fixed-income markets for the poor performance: “lots of smoke, not much fire.”

“While we are disappointed with our performance for the quarter, we are not discouraged,” Meyer wrote. “We work to construct trades that put the odds on our side and protect the downside. But there will be periods, such as this past quarter.”

Meyer added that Convexity took in $507 million in new investments on the quarter. The firm, which has $12.6 billion in assets, debuted in 2006 with more than $6 billion.


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