Thursday, 24 July 2014
Last updated 8 hours ago
Mar 30 2012 | 12:46pm ET
One booming hedge fund will become a lot smaller on Monday. Velite Capital Management plans to return 25% of its capital to outside investors as the natural gas specialist seeks to avoid harming returns by becoming too big.
Houston-based Velite soared more than 50% last year, pushing its assets to $1.4 billion. This year, it's doing even better, having returned 15% through the first two months of the year despite a difficult climate for commodities hedge funds. The firm currently manages about $2 billion.
And that may be too much for the relatively small U.S. natural gas market, especially as the commodity is trading at its lowest level in 10 years, Reuters reports.
"We have had extensive internal discussions relating to our level of assets under management ("AUM") that we think would allow us to trade most efficiently," fund manager David Coolidge wrote to investors this week. "We feel that this distribution is in the best interests of the fund and its investors. We hope our investors will continue to be supportive of our decision to reduce our AUM."
Coolidge's own capital—estimated at about $400 million—will not be covered by the payout, meaning Velite should shrink by about $400 million on April 2.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…