Tosca Turnaround: Funds Soar, Gates (And Profits) Fall

May 18 2009 | 9:22am ET

Toscafund, one of the hedge funds hardest hit last year by the economic crisis, has come off life support. The London firm has made a remarkable recovery this year, lifting the last of its redemption gates and posting double-digit returns in most of its funds.

The firm’s flagship Tosca Fund—whose 67% loss last year forced founder Martin Hughes to beg investors not to give up on it—has bounced back in the first four-and-a-half months of the year, returning 25% through May 13. Two of the firm’s other funds are doing even better: The Opportunities and Small-Cap funds are both up about 60% this year.

“It's nice to be back,” vice chairman Mehmet Dalman told Financial News. “Clients have stabilized, the funds are doing very well and it's business as usual.”

While it’s performance is only a fraction of its brother funds this year, Tosca’s Asian fund had perhaps the best news for investors: The firm has lifted all redemption restrictions on the fund, which has returned almost 10% this year.

And redemptions, which, along with poor performance, halved Tosca’s assets under management to US$2.5 billion last year, have not just stopped, but the firm has recorded some inflows.

“A number of clients have cancelled redemptions,” Dalman told Reuters. “There are no significant redemptions at all.”

Still, the big drops in performance and assets under management hit both the firm and its top management in the pocket last year. Tosca’s profit plummeted 83% to £26.9 million, with Hughes’ own paycheck falling by a similar amount, from £75 million to £14.9 million.


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