Struggling FX Concepts Restructuring In Bid To Survive

Oct 8 2013 | 12:59pm ET

What was once the world's largest currency hedge fund is on life support.

FX Concepts has been battered by poor performance and has suffered an exodus of major clients. And the most recent redemption may put an end to the New York-based firm.

FX, which once managed $14.2 billion, is now scrambling to survive, with chief strategist Robert Savage telling media outlets that almost anything, including a bankruptcy filing, is possible.

The San Francisco Employees' Retirement System last month moved to pull its more than $450 million with the hedge fund, the lion's share of FX Concepts' remaining $621 million. Its move follows redemptions by the Pennsylvania Public School Employees' Retirement System and Germany's Bayerische Versorgungskammer.

FX had about $1 billion in assets at the beginning of the year.

"We are in the process of restructuring," Savage told CNBC, which first reported on FX's dire situation. "We have let go some staff and are in the process of closing some funds. We remain an ongoing firm with years of experience in handling client money and solving FX problems for them."

FX has already shuttered its Volatility JPY Fund and Multi-Strategy HighAlpha GBP Fund, two smaller vehicles. But its flagship, which lost 14.5% in 2011, 3.1% last year and is down 13.9% this year, and which manages most of FX's money, may also bite the dust. "We're thinking of shutting it down," Savage told Reuters, to reallocate resources to better-performing strategies, including its volatility and currency overlay strategies. The firm may also move more capital into its best-ideas Global Financial Markets Fund, which is up 48% this year.

"Trend-following is dead because trends never really get going," Taylor, who founded FX in 1981, told Track.com in July. "Investors trying to read signals in the financial markets pushed by political and central bank diktats have struggled to keep up with the latest government moves."

"John tried his best to ride it for six months," Savage told Reuters.

FX's troubles have been bad news for employees, with the firm laying off nearly half of its staff this week. The firm now has just 20 employees, down from about 60 at its peak in 2007. Among this year's departures are portfolio manager Edward Boyle, compliance director Susan Kim, senior investment researcher Saurabh Kumar, quantitative analyst Dyuti Lad, compliance officer Courtney Wessling and quantitative researcher Simon Zhang, CNBC reports.
 
FX's difficulties are reflected in Taylor's decision to sell his Manhattan apartment, a nine-bedroom spread he bought three years about for $22 million—financed with a $20 million loan from FX. He's now seeking $25 million.

"The story of John agreeing to sell his home to help recapitalize the firm is accurate and, yes, FXC, like many other funds, [has] some debt agreements in place," Savage told CNBC.


In Depth

The Benefits Of Private Debt Investing

May 7 2015 | 10:43am ET

Jeffrey Haas is chief operating officer of Old Hill Partners Inc., an SEC-registered...

Lifestyle

Yale Receives $150 Million Gift from Blackstone’s Schwarzman

May 12 2015 | 12:10am ET

Yale University announced it has received a $150 million gift from Blackstone Group...

Guest Contributor

How To Generate 6% Yield In A Volatile World

May 22 2015 | 6:41am ET

Private credit comes in many different flavors, all with the common themes of over...

 

Editor's Note