Stark Investments will close three of its hedge funds, including its flagship, as its assets under management dwindle.
The Wisconsin firm said a "meaningful reduction" in the assets of its Shepherd Investments International, Shepherd Guardian and Stark Investments funds led to the decision. Stark informed investors by letter on Tuesday, Pensions & Investments reports.
"Despite strong performance in our multistrategy funds this year, which are up between 5% and 6% year-to-date, it has become apparent to us that the financial markets have changed systematically over the past few years," Brian Stark and Michael Roth, the firm's co-founders, wrote. "As a result it has become increasingly challenging for multistrategy funds to deliver to their investors the types of attractive returns with low volatility and limited downside exposure which multistrategy funds have traditionally delivered.
Stark's assets, once as high at $14 billion, have fallen precipitously in recent years. The firm managed $2.4 billion as recently as March, including $1.8 billion in the Shepherd funds, but now manages less than $1 billion, in spite of the launch of its new Mortgage Opportunities Fund in April.
That fund and Stark's ABS Opportunities Fund will remain open. Both have "performed well," Stark and Roth wrote, although their size is unclear; Stark reportedly raised $100 million for the fund and hopes to increase that total to as much as $300 million.