Dalton Investments Liquidates Two Hedge Funds
By Marietta Cauchi
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Dalton Investments said Monday it is closing its two distressed-debt funds and will return some $300 million to investors.
The Los Angeles-based hedge fund said opportunities in the distressed-debt market had dried up because there was more capital chasing fewer high yield bonds, driving up prices.
For the 12-month period ending March 31, 2006, the Global Opportunities Fund, which launched in 1999, had a compound annual growth rate of 2.6%. The Distressed Debt Fund, a 2004 vintage fund, rose just 0.4%. This compares with 7.2% for the Merrill Lynch High Yield Master II Index over the same period.
"We believe it will become increasingly difficult to produce above-average returns with a distressed strategy in the foreseeable future and think it's in the best interests of all investors to have an orderly liquidation," said Steven Persky, co-founder of Dalton Investments and portfolio manager of both funds.
The funds' 20 or so investors - a mix of pension funds, endowments and funds of funds - should get most of their capital repaid in the next 60 to 90 days and returns weren't expected to be significantly different from the end of March figures, Persky said in an interview. Returns for the first quarter were 0.5% on the Global Opportunities Fund and 1.6% for the Distressed Debt fund.
Dalton Investments manages a total $1.3 billion in assets across a number of strategies. Its other six funds include a global small-capitalization fund and a global equity long/short fund, as well as funds invested according to various strategies in Asia.
Persky said he didn't expect the closure of the distressed debt funds to affect investment in the other hedge funds.
-By Marietta Cauchi, Dow Jones Newswires; 201-938-2129; mariettacauchi@dowjones.com
(END) Dow Jones Newswires
May 01, 2006 10:31 ET (14:31 GMT)
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