Garden State Continues Cutting Hedge Funds

Apr 3 2009 | 1:01am ET

The New Jersey Division of Investment is making its fourth hedge fund redemption in two months. This time, the $56.3 billion plan is purging its portfolio of Intrepid Capital Management, a long/short vehicle that specializes in technology, media and telecommunications.

The plan originally invested $75 million in Intrepid two years ago and the fund lost 20.5% last year, according to an internal memo written by director William Clark. Intrepid suffered major redemptions in the fourth quarter, as many of its investors, including endowments and funds of hedge funds, pulled money to meet liquidity needs.

“Unlike many other managers, Intrepid did not impose ‘gates’ on its investors and honored these redemption requests at the end of December 2008,” wrote Clark. “As a result of this, redemptions compounded and the fund had negative returns for 2008. Intrepid’s assets under management have been reduced from its peak of $5 billion down to approximately $400 million.”

Cliffwater, the plan’s consultant, and the plan’s staff had several meetings with Intrepid to “review the situation and to assess the potential impact of the smaller fund size on the fund’s operations and its potential future performance.” And while Clark said the plans maintained a high degree of respect for the firm’s principals, the net effect of the smaller fund size resulted in a reduction in the firm’s staff and its portfolio.

“After careful consideration of these issues, we are proposing to redeem from Intrepid as of March 31, 2009,” wrote Clark.

In February, the plan pulled $100 million each from the GoldenTree Master Fund, a credit hedge fund, and Satellite Asset Management, a multi-strategy shop. The plan also redeemed an unspecified amount from Black River Fund following a restructuring of the fund’s portfolio.

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