Hedge funds, generally the most aggressive species of money manager, do a lot of “black box” trading in which bets are placed on previously-identified patterns and relationships on the assumption that those patterns will repeat in the future.
But with governments randomly buying stocks and bonds and bailing out/subsidizing everything is sight, old relationships are distorted and strategies that worked in the past begin to fail, as do the money managers who rely on them. A few recent examples:
Whitebox Closes Its Mutual Funds Ahead Of January Liquidation
(Value Walk) – Ending its foray into mutual funds, Whitebox Advisors LLC, said it has shuttered all three of its three mutual funds after poor results. According to Amara Kaiyalethe, a spokeswoman, the three mutual funds, which collectively held over $300 million, were closed on December 17th, and will be liquidated January 19th. She said the decision to close the mutual funds was related to performance and the concentration risk investors that remained in the funds faced as redemptions accelerated.
The Whitebox Tactical Opportunities Fund is the biggest among the three mutual funds, which less than two years ago managed over $1 billion, but tumbled by over 21% this year. The fund has suffered a rush of investors heading towards the exits. The fund managed about $240 million at the time it was closed.
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Hedge Fund Lutetium Plans to Liquidate, Return Investor Cash
(Bloomberg) – Lutetium Capital LLC, a hedge-fund firm that invests in distressed securities, is liquidating its two credit funds and returning all of the money it was managing to investors by next month, according to co-founder Michael Carley.
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