How Meredith Whitney’s Hedge Fund Sputtered in Debut Year

Jan 12 2015 | 7:49am ET

‘Crack Analyst’

Even before the departures late last year of Kenbelle portfolio manager Stephen Schwartz, Chief Financial Officer Andrew Turchin and administrator Brittani Caetano, Whitney ran her firm without deputies dedicated to analyzing the stocks she thought would rise or fall. She told colleagues that investors bought in for her ideas and wanted her doing research, the person said.

“She herself is a substantial expert,” Arkin said. “I don’t know precisely what was in her mind for staffing, but I do know she’s a crack analyst.”

In mid-October, as investor jitters over Ebola infections in Dallas drove the Standard & Poor’s 500 Index to its worst three-day drop since 2011, BlueCrest said it wanted its money and expected it back within weeks, the person said. Its stake is bigger than the sum entrusted to Whitney by all of her other investors. The deadline came and went.

Whitney doesn’t have to acquiesce, Arkin said, because her investors agreed not to redeem for two years, and her performance -- an 11 percent slide in last year’s first 11 months -- wasn’t bad enough to trigger an exception allowing earlier withdrawal. On average, hedge funds were up 2 percent over those months, data compiled by Bloomberg show.

Her 5,500-square-foot office became available for sublease, with a listing that advertises good views, an executive bathroom and available furniture. Arkin wouldn’t make predictions about what will happen to Whitney and her fund.

“I have many skills,” he said, “but none of them are fortune-telling.”

--With assistance from Saijel Kishan and Michael J. Moore in New York and Lindsay Fortado and Will Wainewright in London.

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed

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