Tidal Wave Of Greek Fallout – 775 US Hedge Funds Failed Within Last Year
US hedge funds are now going under left and right due to the fallout of the Sovereign Debt Crisis centered in Greece.
The European Sovereign Debt Crisis is taking out US hedge at levels approaching those of the immediate aftermath of the 2008 financial crisis.
While odds are you have only heard about Jon Corzine’s now infamous MF Global a whopping 775 firms have gone under in the last year.
Zero Hedge reports:
It’s not all Aston Martins and Brioni suits for hedge fund managers this year. As Bloomberg reports, “It’s a confluence of tricky markets, super-cautious investors and a tough fundraising environment that’s making it a difficult time for hedge-fund managers.” The latest addition to the 775 funds that were shuttered last year (the most since 2009) sees California-dreamer Paul Sinclair liquidating his $458mm health-care equity fund as “political decisions made on the other side of the globe have undermined his stock picks and spurred losses for a second year.” Physically and mentally exhausted from his travails (planning to spend the summer sleeping and relaxing), Sinclair joins the wannabe likes of Zoe Cruz and three ex-Moore Capital managers, as he honestly notes “I don’t have an edge on Greek elections, the Spanish banking system, what the European Central Bank, the International Monetary Fund, the Chinese government, Angela Merkel, or the U.S. Federal Reserve will do.” It seems an increasing number of masters-of-the-universe are awakening to what retail seemed to figure out over the past few years – that everyone’s a hero in a central-bank-liquidity-driven rally – and as one other hedge fund manager noted in his investor letter “Markets seem to be driven more by the latest news out of Europe than by a company’s earnings prospects, we have not weathered the ensuing volatility well.” Once again correlations are rising – 30-day correlation coefficient between the MSCI World Index and its members is 0.92, compared with the average since 1995 of 0.73 – as all that over-priced alpha is shown up as ‘central-bank’ beta.
Source:Zero Hedge
More from Bloomberg.
California Hedge Fund Is Latest Europe Crisis Casualty
Sinclair, 41, said that over the past year he’s found it increasingly difficult to make money because of the macroeconomic environment, and that investing in health care since 2004 has left him “physically and mentally exhausted.” He said he chose to return money to investors, which he plans to do by the end of the month, rather than hold cash and charge them fees.
Billionaire energy trader John Arnold, former Morgan Stanley co-president Zoe Cruz, and Duke Buchan III are among managers who have shuttered hedge funds in the past year as Europe’s sovereign-debt crisis has roiled global markets. The industry last month posted its biggest loss since September as stocks slumped on concern Greece may exit the euro and the global economy is weakening.
[...]
Tricky Markets’
Returning client money “is an unusual move but fair and would be welcomed by investors,” said Graziano Lusenti, founder of Nyon, Switzerland-based Lusenti Partners, which advises clients on investing. “Most hedge funds would try to hold onto the money for as long as they can.”
Liquidations Rise
Liquidations in the hedge-fund industry rose to 775 last year, the most since 2009, according to Hedge Fund Research Inc., a Chicago-based research firm.
Fortress Investment Group LLC, based in New York, last month said it will liquidate its $500 million commodities fund run by William Callanan after losing almost 13 percent in the first four months of the year.
Arnold also said the same month that he plans to close Centaurus Energy Master Fund in Houston. Cruz, the former Morgan Stanley executive, is liquidating her $200 million hedge fund after losing 8 percent last year.
Buchan, a New York-based hedge-fund manager, cited the European debt crisis as one of the reasons behind the closing of his equity hedge fund Hunter Global Investors LP.
“Markets seem to be driven more by the latest news out of Europe than by a company’s earnings prospects,” he said in a Dec. 8 investor letter. “We have not weathered the ensuing volatility well.”
Moore Traders
At least three hedge funds run by former Moore Capital Management LLC traders have shuttered in the past seven months after losing client money. They are Salute Capital Management, run by Lev Mikheev, Avesta Capital Advisors LLC, founded by William Tung and Tim Leslie’s JCAM Global fund.
Sinclair’s Expo Health Sciences Fund lost about 6 percent this year through May, after falling 8.7 percent in 2011, the hedge fund’s first year of negative returns, he said in an e- mail. The fund has returned about 50 percent since its 2007 inception, net of fees.
Hedge funds slumped 2.9 percent in May and 1.3 percent this year, according to data compiled by Bloomberg. They lost 5.8 percent last year and a record 19 percent in 2008, the data show.
Market Correlation
The turmoil in the global markets has spurred stocks across industries to rise and fall in tandem. The relationship between price fluctuations for health-care stocks and the rest of the market has tightened. The 30-day correlation coefficient between the MSCI World Index and its members in that industry is 0.92, compared with the average since 1995 of 0.73, according to data compiled by Bloomberg. Readings of 1 mean prices are moving in lockstep.
[...]
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