Monday, 26 January 2015
Last updated 2 days ago
Jan 9 2014 | 2:11pm ET
Last year has claimed its last hedge-fund casualty.
New York-based Eagle River Asset Management closed at the end of 2013, The Wall Street Journal reports. The credit specialist was done in by its primary backer's decision to redeem from the firm—and its lackluster prospects for replacing the lost money.
FRM, which was acquired by the Man Group after seeding Eagle River, invested with the hedge fund just months after its founding in 2011, taking a stake in the management company. The "significant investment" gave Eagle River more than $100 million to work with, but the firm never grew much from their, topping out at $150 million before FRM elected to redeem.
As it turned out, however, 2011 was not a great year to launch a credit hedge fund, and Eagle River posted uninspiring returns during its run. The fund gained 3.75% in 2011, 8.62% in 2012 and was up just 2% last year—while stocks soared more than 30%.
"In a world of zero interest rates, low volatility and a stock market that went up 30% in a year, doing absolute-return, relative-value credit is going to look very bad relative to being long," Eagle River founder Michael Pascutti, a former Pacific Investment Management Co. portfolio manager and convertibles chief at Citadel Investment Group, told the Journal.
Pascutti said investors will get the bulk of their money back by the end of this month.
"It was our decision shut down, not our investors'," Pascutti insisted. "We did get some redemptions, but the ultimate calculus was that the opportunity set for us to grow our business was seemingly very poor."
Pascutti told the Journal that his second go at running a hedge fund—he was a co-founder of Sandelman Partners, which fell victim to the financial crisis—will be his last: He said he has no intentions of returning to the hedge-fund industry.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…