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BlackRock Liquidates Its Macro Hedge Fund Following Worst Loss Since Inception, Surge In Redemptions

Tyler Durden's picture




 

First it was Fortress' once-gargantuan, peaking at over $8bn in AUM in 2007 "macro" hedge fund (which really was an FX trading desk betting on the 'acumen' of a rather dubious former employee from Citi, Jeff Feig, who has been implicated in the endless currency manipulation story) which unexpectedly shut down a month ago on massive losses mostly in Brazil, and now - moments ago - we learned that another just as vaunted hedge fund is liquidating.

According to Bloomberg, BlackRock Inc., the world’s largest asset manager, is winding down a global macro hedge fund after losses and investor redemptions eroded assets.

The reason for the liquidation: losses of 9.4% this year, cited by Bloomberg according to an October investor document, leading to the worst year for the asset manager since inception in 2003. The fund, which had $4.6 billion in assets just two years ago, has shrunk to less than $1 billion as of Nov. 1.

As noted above, BlackRock, best known for its ETFs and Larry Fink's crusade against stock buybacks, is joining money managers including Fortress Investment Group LLC and Bain Capital that shuttered macro funds this year.

Bloomberg notes what we have known for a long time, namely that "many investors have struggled to navigate market turns that included an unexpected surge in the Swiss franc in January, a rally in European government bonds in April, a surprise devaluation of the Chinese yuan in August, falling oil and gold prices and a third-quarter selloff in stocks that were popular with hedge funds."

More details:

“We believe that redeeming the Global Ascent Fund was the right thing to do for our clients, given the headwinds that macro funds have faced,” the firm said in an e-mailed statement.

 

Global Ascent, run by Paul Harrison, sought to profit from inefficiencies in global currency, fixed income, credit, equity and commodity markets. The fund lost 12.3 percent in the first quarter, extended losses to 14.5 percent through May, before paring declines, according to investor documents.

 

Harrison had been on the investment team of the fund since 2006 and ran it as lead manager since 2010. Most of the fund’s position have been closed out and converted to cash, said one of the people. BlackRock expects that a number of the fund’s managers will join other investment teams within the firm.

 

The fund had three losing years before this year, declining 2.9 percent in 2004 and about 7 percent in 2008 and 2011. Over the past four years, returns haven’t exceeded 1.4 percent.

BlackRock’s global macro fund is part of the firm’s direct hedge fund business, which oversaw $31 billion as of June. The unit, which started its first strategy in 1996, runs more than a dozen funds, including a $2 billion fundamental global fixed-income pool and $1.3 billion multi-strategy fund.

“We are committed to our macro investment capabilities,” BlackRock said in its statement. “Many of our multi-asset and single-asset class strategies combine top-down (macro) techniques with bottom-up (security level) capabilities and we believe macro factors can be important contributors to successful performance.”

At the end of the day, Blackrock's admission of defeat in the macro investment arena will be nothing but a drop in the bucket: the company oversees $4.5 trillion globally, though much of it is in low-fee exchange-traded funds. The firm this month cut fees on some ETFs to as low as 0.03 percent of assets. The hedge funds, while small by comparison, carry much higher fees -- in the case of the macro fund, a 2 percent management fee and 20 percent of profits.

But while the loss of Global Ascent will not impair Larry Fink's gargantuan year end bonus, other hedge fund managers, many of whom are suffering far greater losses than BlackRock, are fighting tooth and nail to avoid the same fate even though the S&P is trading about 3% below its all time high.

They will fail.

 

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Wed, 11/18/2015 - 10:20 | 6808637 venturen
venturen's picture

There will just one, to rule them all...The Hedge Fund known as "THE FED"

Wed, 11/18/2015 - 10:22 | 6808647 new game
new game's picture

japan, the template...

Wed, 11/18/2015 - 10:28 | 6808670 DeadFred
DeadFred's picture

BlackRock is not an integral part of THEM so it is considered a competitor and potential food for the squid.

Wed, 11/18/2015 - 10:42 | 6808712 Big_Hitman
Big_Hitman's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.wallstreet34.com

Wed, 11/18/2015 - 10:20 | 6808638 vote_libertaria...
vote_libertarian_party's picture

liquidated and converted to diamonds and gold...

Wed, 11/18/2015 - 10:21 | 6808641 Francis Marx
Francis Marx's picture

A person dragged off the street and put into their trading and investment department couldnt of even lost that much.

Wed, 11/18/2015 - 10:29 | 6808675 DeadFred
DeadFred's picture

I could have easily done so.

Wed, 11/18/2015 - 10:39 | 6808700 SoilMyselfRotten
SoilMyselfRotten's picture

So could've Bill Ackman

Wed, 11/18/2015 - 10:30 | 6808671 Rainman
Rainman's picture

BTW ... all those 2/20 fees the muppets paid are non-refundable.

Thanks for playing !

Wed, 11/18/2015 - 10:41 | 6808695 Atomizer
Atomizer's picture

That's why I had a battle regarding my Vanguard Account with a ZH Muppet. Some will remember. 

Wed, 11/18/2015 - 10:36 | 6808689 Atomizer
Atomizer's picture

I missed the call in, forgot. 

Name: Market Perspectives Call
Date: November 16, 2015 
Time: 4:00 pm ET / 1:00 pm PT
Call: 1-800-419-9895

Wed, 11/18/2015 - 10:40 | 6808704 PontifexMaximus
PontifexMaximus's picture

no problem for them, they cashed their fees and launch a new fund, there is simply too much OPM (inst. money etc.) to
be burned. who cares, the show must go on. once you are so big as they are, it's much easier, ask LF.

Wed, 11/18/2015 - 11:01 | 6808774 mijev
mijev's picture

"Global Ascent, run by Paul Harrison, sought to profit from inefficiencies in global currency, fixed income, credit, equity and commodity markets."

To be fair, this guy probably made all the logiical moves that any halfway intelligent trader would have made. Given the state of the economy he probably bet against stocks and maybe even the USD, bought some PMs etc. The only thing he did wrong was to underestimate the obscene criminal actions of the central banks -- and I suspect, like some of the rest of us, he got burnt at the stake.

Wed, 11/18/2015 - 11:09 | 6808815 GMadScientist
GMadScientist's picture

On the other hand, the Global Descent Fund is showing very strong gains this year.

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