Drake Capital Management is finally throwing in the towel on its loss-making hedge funds.
Drake Capital Management is finally throwing in the towel on its loss-making hedge funds. The New York-based global macro and fixed income manager will close two additional funds, some two months after announcing plans to liquidate its flagship Global Opportunities Fund, which had USD2.5bn in assets. The firm says it will return around USD4bn to investors by March 2009, starting this month.
Drake will also begin selling assets of its USD1.4bn Absolute Return Fund and the smaller Low Volatility Fund but has reassured investors that the portfolios are ‘well-positioned to avoid forced sales’. The firm suspended withdrawals earlier this year after last year’s losses triggered mass redemption requests. The seven-year-old asset manager has said that later this year it will launch new funds and offer fee discounts to current investors.
A new hedge fund incubation joint venture is bringing together American International Group’s AIG Investments and Old Mutual Asset Management’s seeding platform Larch Lane Advisors, which plan to seed managers representing various strategies and geographic regions with between USD50m to USD200m each. AIG Investments, led by Robert Discolo, manages USD10bn of alternative assets. Established by Mark Jurish in 1999, Larch Lane has been an affiliate of Old Mutual since 2005.
China’s USD74bn national pension scheme, the National Council for Social Security Fund, has won approval from the country’s State Council to allocate up to 10 per cent of its assets in private equity.
Citigroup’s woes escalated as the Securities and Exchange Commission launched conducting an informal inquiry into its hedge funds. The SEC has sought records concerning the funds, Citi said, without specifying which vehicles were under examination.
Meanwhile, the bank wants to liquidate its Falcon Strategies fund but investors have sued to halt a tender offer for their shares. The fund, which has lost 80 per cent in value, had suspended redemptions and distributions on March 20. The shareholders are opposing the tender because they say they do not have enough information on which to take a decision.
London-based Polygon Investment Partners has removed credit and bond strategy specialist Alexander Jackson as chief investment officer as losses mount and investors flee. Polygon’s master fund is down 5 per cent this year, and the firm’s assets under management have slipped from a peak of USD8bn to some USD6bn today. Investment responsibilities have been handed to Reade Griffith, who runs Polygon’s event-driven strategies. New York-based Jackson will remain a partner at the firm.
Man Investments has launched a new futures fund, Man AHL Guaranteed Futures 3, to meet demand from Hong Kong investors. The new entity invests in Man’s 15-year-old futures platform AHL Diversified, which uses quantitative trading strategies to exploit market inefficiencies in more than 140 markets around the globe. The firm’s first Hong Kong-authorised futures fund, Man AHL Diversified Futures, has produced annualised returns averaging 14.4 per cent since its launch in May 1998.
Unsecured creditors of the defunct Bayou Group have hit Goldman Sachs with a USD20.6m lawsuit, claiming that Goldman Sachs Execution and Clearing failed to pay heed to many obvious red flags of which it was aware in its role as the fund’s sole trading broker between 1999 and 2005.
The plaintiffs allege Goldman stood by as the fund concealed trading losses and concocted fraudulent return statements. The claim seeks to recover funds the Goldman unit wrongly allowed Bayou to pay into margin accounts. Bayou Group collapsed in July 2005 and three of its managers have been convicted for defrauding investors. The group is in Chapter 11 proceedings.
