When BlueCrest Capital Management told investors Tuesday it would no longer oversee money for outsiders, one thing founder Michael Platt didn’t mention was that clients had already pulled billions of dollars this year.
Platt, who cited client demands and pressure on fees as a reason for his decision, isn’t alone in feeling the heat from investors. Firms including Och-Ziff Capital Management Group LLC and Mason Capital Management have seen cash flee this year, and others such as Fortress Investment Group LLC’s macro funds business shut down after redemptions and losses.
Hedge fund investors are losing patience even with marquee firms as many of them struggle this year, especially those that offer macro strategies or stock funds heavily weighted to rising shares. Some managers have lost money for two years running, while others such as David Einhorn’s Greenlight Capital are suffering declines that rival their worst year. After the weakest third-quarter inflows in six years, the industry could see outflows in the fourth quarter, said investors and bankers who watch the ebb and flow of hedge fund assets.
“The fourth quarter will be flat and possibly negative,” said Peter Laurelli, head of research at Evestment Alliance, which tracks hedge fund investments.
Hedge fund managers got off to a promising start in 2015, outpacing equity benchmarks including the Standard & Poor’s 500 Index. The second half of the year has proved more challenging as volatile markets create some of the steepest losses since the 2008 financial crisis for some of the most prominent managers in the business.
Ackman, Einhorn
The $2.87 trillion industry added $45.3 billion in net deposits in the first nine months of the year, according to Hedge Fund Research Inc. Only $5.6 billion came during the three months ended Sept. 30, the lowest third-quarter take since 2009, when a net $1.1 billion was deposited. If no money pours into funds in the current quarter, inflows in 2015 will be at least 40 percent below last year.
Among the most prominent losers in the second half is Bill Ackman, whose Pershing Square Capital Management is down more than 17 percent in 2015 through November. The firm has been hurt by its investment in Valeant Pharmaceuticals International Inc., whose shares have slumped 31 percent this year amid scrutiny over drug prices.
Einhorn’s Greenlight Capital has declined 21 percent this year, as positions such as SunEdison Inc., Consol Energy Inc. and Micron Technology Inc soured. Einhorn’s worst annual loss was in 2008, when his fund fell 23 percent.
Mason’s Slump