London-based Comac Capital, the USD1.2bn global macro hedge fund established by Colm O’Shea in 2006, is returning money to investors following heavy losses this month.
The move comes as the fund was hit hard last week, as were many hedge funds and FX traders, by the incredible decision by the Swiss National Bank to end the Swiss franc’s cap against the euro.
The decision caused chaos in the markets and led to the Swiss franc rising from 0.83 to 1.007 against the euro on 15 January. It is believed that Comac incurred losses of 8 per cent bringing total losses in January to 10 per cent, reported Bloomberg. Comac is not closing the fund and will continue to trade internal capital, although the amount was not disclosed when speaking to Peregrine Communications, the firm’s PR representative. Suffice to say that the majority of the fund’s AuM will be returned to investors.
The decision to act swiftly by Comac, although under unfortunate circumstances, is a positive one. There are no sidepockets, no costly wind-up of the fund charged to investors, no redemptions that could allow the firm to charge management fees on 60 days’ notice: this is a straight-up return of external capital following a ‘black swan’ hit to the portfolio. As such, it demonstrates a level of responsibility to the fund’s investors that should be welcomed.
Other hedge funds have been caught out this month by the SNB’s radical decision. Marko Dimitrijevic’s Everest Capital saw its USD830mn Everest Capital Global fund get vapourised by the franc’s move against the euro, noted Bloomberg. In addition, BlueCrest, one of Europe’s largest hedge funds, has closed the trading book of one of its senior currency traders reported the Financial Times. The trading book was run by Peter Von Maydell.
Events over the past week have caused absolute chaos for investors. UK FX broker, Alpari, went into insolvency following the “exceptional volatility and extreme lack of liquidity” that resulted. Whilst over in the US, shares in FXCM were suspended before the markets opened in New York last Friday after shares in the forex trading group fell 90% in pre-market dealing.
This is what can happen when a central bank throws a curveball. It’s a classic black swan event and there are always significant casualties.
