Hedge Funds Dropping Like Flies: Doug Hirsch's Seneca Capital Closing After 20 Years

Tyler Durden's picture

Three weeks ago when news of the dramatic gating and liquidation of Third Avenue's high yield debt focused fund first hit, we said that "now that the dreaded gates are back, investors in all other junk bond-focused hedge funds, fearing they too will be gated, will rush to pull what funds they can and submit redemption requests, in the process potentially unleashing a liquidity - and liquidation - scramble within the hedge fund community, which will first impact bonds and then, if the liquidity demands continue, equities as well."

Sure enough, promptly thereafter several other junk-debt focused hedge funds shut down, culminating with yesterday's liquidation of Whitebox's various multistrategy mutual funds.

And now, moments ago we learned, another hedge fund has decided to call it quits, this time chess-afficionado Doug Hirsch's event-driven $500 million Seneca Capital, which according to Bloomberg is returning most outside capital by today.

Bloomberg adds that "Seneca is returning money amid the worst year since 2011 for event-driven funds, which on average declined 2.3 percent through November. The closing adds to a roster of hedge funds, both big and small, that have shuttered in 2015 as the industry struggles to generate profits. LionEye Capital Management, another event-driven fund, is closing after losses, while BlueCrest Capital Management, Fortress Investment Group LLC and BlackRock Inc. are liquidating some of their funds."

Yet oddly enough, like in various recent hedge fund closures, Seneca's YTD loss was not extensive: the fund, which made wagers on corporate events such as mergers, spinoffs and restructurings, said it lost 6 percent this year in its domestic fund, hardly dramatic enough for such a terminal step.

And yet in his December 21 letter Hirsch said that  “I am no longer able to continue making the commitment and sacrifices required to run outside capital. Despite negligible redemption requests and increasing market opportunities that are the result of a challenging year in event-driven investing, I cannot in good faith start next year with the dedication required to manage your capital.”

Hirsch, who founded his New York-based firm in 1996, said he will continue investing his own money through Seneca and intends to make a “significant” allocation to a fund that his partner, Jon Schwartz, is planning to start.

In addition to running Seneca, Hirsch is perhaps better known for being one of the founders of the Sohn Investment Conference.

The Sohn Investment Conference is one of the hedge fund industry’s biggest events and raises money for pediatric cancer research and care. Hirsch helped start a foundation 20 years ago honoring the memory of his friend, Wall Street professional Ira Sohn, who had died from cancer at the age of 29. The foundation has raised more than $60 million.

The Sohn conference is best known for uncovering deep "fundamental" investment theses. As such, Hirsch's decision is perhaps a fitting testament and epitaph to the death of "markets", which as even Bank of America noted last week, are so broken due to central bank intervention, that no fundamental investing is possible any more.

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Wulfkind's picture

All your hedge are ZeroHedge in the end.

Eirik Magnus Larssen's picture

One can't but enjoy a bit of Schadenfreude over such vulture funds having miscalculated.

johngaltfla's picture

Natixis has just sent out a letter to financial advisor informing them of the board's decision to liquidate the CGM Advisor Targeted Equity Fund (MUTF:NEFGX) (MUTF:NEBGX) (MUTF:NEGCX) (MUTF:NEGYX) on February 17th, 2016.

Mutual funds seem to be going tits up rapidly also. Q1 could be an awesome shit storm.

Seasmoke's picture

Why are these Hedgies closing shop with fairly minimal losses ??? My guess is a story with names Hirsch. Schwartz. And Sohn. Leaves me no other reason other than  they know what's coming in the very near future. 

Squid-puppets a-go-go's picture

maybe the Fed is doing to hedge fund industry what the Saudis are doing to US Shale ??

KesselRunin12Parsecs's picture

They're returning all the capital (that they didn't have any more room for to sew into their trousers)

johngaltfla's picture

Minimal losses? Some of these firms were down 40%+ back in 2009. They used the tools provided via free money from the Fed, leveraged up, bet on the obvioius and won.

Now that they are exiting that should tell you that the equity safety net which absorbs massive down moves is no longer there. Watch and see what happens next year, it's going to get nasty.

847328_3527's picture

The Hedge Fund managers still take thier $$$$$$ commissions and bonuses.

 

That's odd.

Wulfkind's picture

At least this guy has decided to gamble with his own money.  But then again....nobody's money is his or her money when we have the Federal Reserve, I guess.

Albertarocks's picture

Well these guys are in the business of managing their clients' money and making nice returns in the stock markets.  That's their job so they had better be good at it.

They are exasperating bastards that's for sure, because they wield enough energy to move the markets sometimes.  It's not always the Fed or its minions JPM, Goldman, etc. who jack this thing up for no apparent reason.  So I actually find it very refreshing and 'healthy' to see that a lot of these hedgies actually 'do' know what they're doing.  Even better... they're getting their clients out of the markets at what is probably a top, or very near the top.  That is commendable.  Not only that, but this could also mean that if the hedgies are not going to be there to act as the buyers of last resort (the ultimate bag holders), then maybe... with any luck at all... it will be the big corrupt Wall Street banks who have to take that particular bath.  Either that or the markets are getting all set up to tank a lot harder than most investors think likely.  I see a big vacuum starting to form under the market... no buyers.  No bid.  Flash!  And this time it simply has to be the worst and fastest crash in the history of the solar system.  Mathematics just dictate that this has to end very badly.

Max Cynical's picture

Do hedge funds regularly close that we don't hear about it or is this becoming a trend? e.g. I haven't heard about any Wall Street suicides in months.

Are they closing because of losses or because they know something is going to happen? What do they care if they lose others people money?

nidaar's picture

'like rats leaving a sinking ship'

conraddobler's picture

On a long enough....... he he he he.

rejected's picture

Who cares!?  Stocks are up,,, up,,, up!

Awesome!!!!

SillySalesmanQuestion's picture

All we need is a ten and a fiver
Keys and a car, and a sober driver
B a n k R u n, BankRun

Wile-E-Coyote's picture

These fuckers have been given the wink and the nod. Take this as warning of things to come.

Jstanley011's picture

No need for a winks or nods, just look at an ES chart. Talk about a massive rollover in the direction of oblivion....

Squid Viscous's picture

vat's a nice young Jew boy like Hirsch supposed to do now ? oy veh!

MASTER OF UNIVERSE's picture

All the King's horses, and all the King's men, could not put Alan Greenspan's FED 'put' back together again!

 

Next stop, ZOMBIE Empire.

Soul Glow's picture

With all these funds closing their doors the only institution left in the market are the central banks.  Funny thing about that is they can never sell.

TAALR Swift's picture

No "Fundamental Investing is possible."

Really?  There are no more assets at sub-normal prices?  Nothing that has been deliberately beaten down in price? Nothing?

This is ironic, because my list of Assets got populated pretty fast, using my aforementioned criteria.  Hint: it's heavy, shiny and precious.