Beacon Hill, Amid Steep Losses,
Plans to Shutter Hedge Funds
Beacon Hill Asset Management LLC, one of the biggest hedge-fund managers in the bond business, has told investors that it suffered losses of more than 50%, or more than $400 million, in just the past few months. Things have gotten so bad that Beacon Hill now is closing down its biggest hedge funds and selling its remaining positions, even as the firm sells off other bond investments in hopes of averting further losses that could threaten the entire firm.
Another shock for Beacon Hill's investors: They can't pull their money out of the floundering hedge funds, or even receive updates about how badly the hedge funds are doing, for the next six months. In a letter to investors on Friday, Beacon Hill said it was suspending investor redemptions, a move that is allowed under the terms of the hedge fund's offering documents.
The firm also disclosed that some of its losses took place before September, even as investors were told the fund was in positive territory, suggesting that investors may have been misled about how the fund was performing.
Last week, Beacon Hill, a $2 billion firm based in Summit, N.J., stunned investors when it told them that the firm's biggest hedge funds, the $600 million Bristol Fund Ltd. and the $140 million Safe Harbor Fund LP, had dropped about 25% in September. The firm attributed the loses to problems in the mortgage-backed bond market after interest rates plunged and Beacon Hill's mortgage-derivative positions tumbled in value.
In a letter to investors, Beacon Hill's management said, "we regret to inform you that our review suggests that the losses of the Fund were greater than initially reported." The losses, as of Sept. 30, were 54%, not the 25% as initially reported.
"In the current environment, we believe that it is in the best interest of the Fund and investors for the Fund to move toward an orderly liquidation of its portfolio over approximately the next six months and termination of the Fund thereafter," according to the letter to Beacon Hill's investors.
A representative of Beacon Hill didn't comment |
