Following a year of historic routs in the hedge fund space, yesterday we pointed out that after the new year's break, it was time for the pain among the active investors to return:
Time for the first hedge fund liquidation of 2016
— zerohedge (@zerohedge) January 4, 2016 [5]
Less than 24 hours later, this is exactly what happened when as Bloomberg reports [6], Nevsky Capital’s $1.5 billion hedge fund is shutting down and returning money to investors. The reason: the emergence of computer-driven trading strategies and index funds diminish money-making opportunities.
What again is surprising about this latest hedge fund liquidation, is that the fund was not a significant underperformer, in fact according to BBG it was up 0.9% in 2015, outperforming the majority of the "smartest money" out there:
The London-based firm managed by Martin Taylor and Nick Barnes makes bets on rising and falling share prices in developed and emerging markets. The fund returned 18.1 percent in 2013 before losing 1.4 percent the following year. In the first 11 months of 2015, the fund was up 0.9 percent, according to data compiled by Bloomberg.
Even so, the founders have had enough with a centrally-planned, HFT manipulated "market" which is that only in name.
“We have come regretfully to the conclusion that the current algorithmically driven market environment is one which is increasingly incompatible with our fundamental, research orientated, investment process," Taylor, the firm’s chief investment officer, said in a statement.
As a reminder, Nevsky is the latest in a long, and getting longer by the day, list of funds joins hedge-fund firms such as billionaire Michael Platt’s BlueCrest Capital Management, Doug Hirsch’s Seneca Capital, and Scott Bommer’s SAB Capital Management who are returning money to clients and adding to an accelerating pace of hedge funds shutting down globally.
More from Bloomberg [6]:
Taylor started the current version of the fund in 2011 and aimed to manage no more than $800 million after deciding to step away from the “intensity” of running the original $3.3 billion hedge fund that was started in 2000. The fund returned 14.6 percent in 2012.
Nevsky expects to liquidate the portfolio and move into cash by the end of January. The fund’s 18.4 percent annual gain since 2000 is nearly 10 times more than returns generated by average peers as measured by the HFRX Index, Nevsky said in the statement. Taylor and Barnes started the original fund while working for London-based Thames River Capital. Both previously worked at Baring Asset Management.
To be sure, there are many more hedge fund liquidations to come, especially if Nevsky's ominous parting warning comes true: "The bear market in emerging market equities, which began in 2011, may eventually engulf developed markets too."
