Nevsky Capital’s $1.5 billion hedge fund is shutting down and returning money to investors as the emergence of computer-driven trading strategies and index funds diminish money-making opportunities.
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.
“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. “The bear market in emerging market equities, which began in 2011, may eventually engulf developed markets too.”
Nevsky Capital 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 in returning money to clients and adding to an accelerating pace of hedge funds shutting down globally.
A total of 257 funds were liquidated in the third quarter, up from 200 in the previous three months, according to Hedge Fund Research Inc. That brought the number of closures for the first nine months to 674, compared with 661 during a year earlier.
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.