Tudor Shutters Small-Cap Fund, Expands In Private Equity

Jun 6 2007 | 9:46am ET

Tudor Investment Corp. is closing its small-cap stock fund, but may expand its private equity offerings.

The $17 billion Greenwich, Conn.-based hedge fund said returns in its $550 million Witches Rock Fund have not been up to snuff—it trails the broader markets with a 24% net-of-fees return since its inception two and a half years ago. Manager, and firm vice chairman, James Pallotta also lamented the lack of opportunities in a letter sent to investors yesterday.

“I am disappointed by the current small-cap opportunity set and prospects for the sector going forward,” he wrote in the letter, obtained by Bloomberg News. “I believe this frustration is widespread among small-cap managers. In fact, I have received several calls in the last six months from managers hoping to fold their businesses into ours.”

In addition to returning the $550 million, Tudor is also refunding some $25.3 million in accrued fees. Rather than getting their money back, Pallotta wrote that investors can choose to transfer their investments to his $11.5 billion Raptor Global Fund.

But while the firm sees no future for its small-cap investments, it apparently does see one in p.e. Tudor, which already has a separate $700 million p.e. arm based in Boston, says it will probably proceed with a new p.e. fund focused on “less liquid special opportunities.”

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