Hedge Fund Sailfish Drowns In Credit Crunch, Redemptions

Feb 27 2008 | 1:13pm ET

The world has indeed changed dramatically and rapidly for hedge fund Sailfish Capital Partners since August 2007. The one-time $1.9 billion firm, which lost 12% that month, has seen its assets under management dwindle to some $980 million in January amidst flagging performance and investor redemptions. 

And after weeks of batting down rumors about its demise, a source close to the firm has told FINalternatives that Sailfish is indeed winding down.

Sailfish’s founding partners, Mark Fishman and Sal Naro, sent a letter to investors on Feb. 13 pointing to a backdrop of falling interest rates and the evaporation of several sectors of the credit market—such as the student loan market, the bridge loan market and the consumer credit market—as ingredients for the firm’s downfall.

“August proved to be more difficult than we anticipated and the rate of decay in the credit market significantly impaired our ability to modify certain portfolio risks as quickly as we would have liked,” according to the letter, which was read to FINalternatives by an investor source. “Our portfolio was hurt by higher rated securities and a rapid deterioration of liquidity and not by subprime or subprime derivatives. Nevertheless, it was the contagion effects of subprime that spilled rapidly into structured products, the leveraged loan market and all markets in general…and now clearly this has spilled into the equity markets as well.”

Throughout this difficult environment, the partners said they reduced risks in underperforming sub-strategies, sold off positions, and in certain cases, closed substrategies. They added that they carefully managed capital flows and were diligent not to miss margin calls, and they remain in good standing with all of their prime brokers to this very day. However, they said current difficult and illiquid market conditions were not conducive to positive returns that both they and their investors expect from their multi-strategy format.
 
“Therefore, based on the above-mentioned market conditions, cumulative redemption requests and overall fund performance, Sailfish Capital Partners…has determined the normal operations of the fund is no longer in the best interest of the fund's shareholders,” according to the letter, which went on to say that the liquidation process would take three to six months or longer depending on market conditions.

A spokesman for Sailfish declined to comment on the letter.

RELATED ARTICLES:

Traders At Hedge Fund Sailfish Ordered To Liquidate Positions
Hedge Fund Sailfish Refutes Claims It is Blowing Up


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