Zeev's Turnips Patch-No Politics (ZEEV)

[marketmaven]

Battered hedge funds enter 'year of the wife'

"There will be a Darwinian element to the industry," said Mr Beazley. "This year will be the year of the wife. These guys left safe jobs two or three years ago, saying they'd make a fortune. Now they are working every hour God sends and their wives will be asking: 'Where's the sports car? Where's the second home? Why are you doing this?'"

http://news.independent.co.uk/business/news/story.jsp?story=649625


26 June 2005- The Independent

RAB Capital, the hedge fund business that sold £25m worth of shares to a group of wealthy individuals last week, has seen the performance of its funds plummet in recent months.

The group, founded by Michael Alen-Buckley and Philip Richards, sold 14 per cent to investors including the steel magnate Lakshmi Mittal and the Solvay family, the Belgian chemical tycoons.

In addition, one of the leading players in the industry predicted that many hedge fund managers may simply shut up shop because parts of the sector are becoming unprofitable.

Two of the largest hedge fund managers, GLG Partners and Vega, have come under pressure in recent weeks because of poor performance attributable to losses in volatile capital markets. A third, Bailey Coates, has had to close its flagship Cromwell fund after a 24 per cent drop in value.

RAB's largest and most successful fund - the $550m RAB Special Situations - suffered a 19.5 per cent fall in the three months to the end of May. An investment trust launched by RAB to mirror this fund fell even further and stood at 23.8 per cent below its launch price at the end of May.

RAB has suffered poor performance across its portfolio, with its UK Equity Fund down 7.6 per cent, its Energy Fund dropping 6.2 per cent and its American Opportunities Fund down 9.4 per cent.

Mr Richards admitted that RAB has been through a difficult second quarter of the year, due in part to problems in the convertible and collateralised debt markets. However, he said June has been better and all but one of RAB's big funds are in positive territory for the year.

Major players in the market are predicting that the well- publicised problems with hedge funds will lead to a big shake- out.

Although investors are not running for the door, the flow of funds into what was a growing market is causing a lot of problems.

Charles Beazley, who heads Gartmore's 14-strong hedge fund portfolio, says that 77 per cent of the 7,000 funds in the market have less than $100m of assets and 72 per cent have less than $75m.

He argues that below $75m it is impossible to run a fund management operation profitably.