Bay Area and U.S. hedge funds bleed, one is gone:
Bottom Line - Andrew S. Ross - S.F. Chronicle
Bay Area, U.S. hedge funds bleeding, one's gone
Thursday, December 11, 2008
There probably won't be many tears for Larkspur's Copper River Management LLC. The $1 billion hedge fund's partiality to short selling earned it obloquy, lawsuits and, ultimately, death.
No trace of company personnel could be found for comment Wednesday, after the Wall Street Journal reported that the fund is "liquidating and returning funds to investors." The only sign of life was a forlorn logo on the company's Web site. The cause of demise? Some observers predicted it after the company, formerly known as Rocker Partners, got caught on the wrong side of derivative trades with the going-bankrupt Lehman Bros. Others pronounced the patient terminal when the feds banned short selling of financial stocks in September.
If Copper River's death was singular, there are other Bay Area hedge funds in serious trouble, if not quite as fatal. Most notable is San Francisco's $30 billion Farallon Capital Management LLC, whose funds are reportedly down about 30 percent this year. Recently Farallon, ranked as one of the largest hedge fund companies in the world, erected a "gate" on redemptions, limiting the amount money investors can withdraw. Other giant hedge funds with offices in the Bay Area, like Fortress Investment Group, have put up similar "gates" as their woes mount.
"This is happening all over the industry," said Vincent Delurad, an analyst at TrimTabs Investment Research in Sausalito. He estimated U.S. hedge fund assets have shrunk by nearly 50 percent this year, from $1.9 trillion in assets to $1.1 trillion. With December shaping up to be the wickedest month, Delurad estimates redemptions will reach as high as $250 billion before the year is out, not to mention up to $700 million in trading losses. "Funds are running out of money," he said.
But for some, where there's a problem, there's an opportunity. The COO of Hong Kong's Tai Tam alternative asset management firm was spotted recently in San Francisco looking for $100 million from investors to start up a new Asia-focused hedge fund.
AI
