Perry Capital Down 20% Despite Preparing For Downturn

Nov 20 2008 | 1:45am ET

Perry Capital’s difficulties mounted in October, as the firm’s flagship shed another 13.6%, leaving it down in excess of 20% for the year.

The US$10 billion fund suffered from both the short-selling bans and concurrent deleveraging, according to Financial News. It is down about 21% year-to-date.

“We are very disappointed with our recent performance, particularly since we have been reducing our overall equity exposure and building liquidity for over 12 months in anticipation of a global crisis,” founder Richard Perry told investors in a letter. “While we had been preparing for the next distressed cycle, the panic and the forced liquidations that ensued coupled with the magnitude and speed with which the credit markets effectively froze were not things we could escape unscathed.”

Perry shed 6.13% in the third quarter, but told investors that the fund’s performance had held up until the last 10 days of September. But those losses accelerated in October, with its equities strategy falling 8.8% and its credit strategy dropping 3.3%.

Perry said the fund was shifting to a distressed debt strategy, which he believes will allow it to capitalize on, rather than be victimized by, the market volatility.

“We believe that the severe dislocations today have generated opportunities particularly in the credit markets; however we are anticipating a prolonged period of severe global financial and economic weakness,” he wrote.

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