Hedge Funds Shelve New Offerings

Dec 9 2008 | 2:03am ET

Global market dislocations and tightening regulatory environment have made it tough for hedge funds to raise new money. So tough, in fact, that many are postponing their launches, some indefinitely.

Newer hedge fund managers with sought-after pedigrees are finding it a hard sell to raise capital for a new fund in the current environment. Kenneth St. Hill and Dawud Nelson, who set up New York-based Koshdan Capital Management after leaving Bridegwater Associates, started trading the Koshdan Beta Neutral Fund in February, returning 1.73% through October. The duo were readying the hedge fund for launch sometime in the third quarter with about $20 million.

Instead, Nelson said the firm is currently running a couple of managed accounts and does not expect the fund to launch until January.

“It’s been difficult to get firm commitments from seeders because of the market,” he said.

Also, Global Recovery Investments, a joint venture set up by a former Bear Stearns executive Fred Jones and Chicago-based investment bank Andes Capital Group, planned to launch its Global Recovery Fund, a distressed hedge fund, in the third quarter with between $10 million to $20 million in assets. But pension funds that were in the final stages of due diligence still have not allocated to the fund yet, according to Imran Mukati, head of trading at Andes.

“There is a small portion of $10 million to $15 million being managed right now by Fred Jones, but we want to be a $1 billion-plus fund and the pension funds that we’re in front of right now will allow us to get there,” he said.

Other hedge fund offerings on the shelf include Gartmore’s European Absolute Return Fund, a long/short vehicle. The fund, which was slated for an Oct. 31 debut, was set to employ a strategy similar to that of Gartmore’s flagship European equity long/short offering, the AlphaGen Capella Fund, and take long and short positions in equities and derivatives.
 
Instead, the British  short-selling ban and continuing market volatility have convinced the firm to shelve the new fund. And, last month, Value Partners Group, a US$3.1 billion firm, postponed indefinitely a new fund to buy Asian bonds sold by banks and hedge funds. In an interview, Teresa Yu, a Hong Kong-based spokeswoman, explained, “many of the extraordinary value opportunities that were identified by our investment team in preparation for this fund launch have diminished significantly over the past few days.”

Yu said the firm’s management decided to postpone the fund until “value opportunities present themselves again.”


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