Vega's Funds Are All Losing Money
Poor Performances Reflect
Short Positions in Markets;
Will Investors Stick Around?
By MARGOT PATRICK and ALISTAIR MACDONALD
October 6, 2006; Page C5
online.wsj.com
Returns on all six funds at Vega Asset Management, once one of the world's largest hedge funds, are in negative territory this year, according to a letter sent by Vega to its investors, raising questions about whether Vega's investors will stick with the firm if the losses continue.
One of those funds, Vega Select Opportunities Fund, a global macro fund making bets on fixed-income and currencies of G-10 industrialized countries, fell 10.6% in September and 9.7% in August, leaving it down 16.7% for the year through September. A person familiar with the matter said the fund, which manages about $1.5 billion, was down 17.5% through Oct. 3, suggesting the fund has continued to post losses in the first few days of this month.
Since the start of 2005, investors in the fund have lost more than a quarter of their capital from negative performance. The fund, which is run by star trader Ravinder Mehra, was launched in June 2000.
KEY DOCUMENTS
[Letters] • Vega's Letter to Investors1
• Vega's Monthly Performance Update2
"During September, the Vega Select Fund incurred losses primarily from short positions in the U.S., European, and to a lesser extent, Japanese fixed-income markets," the fund's president, Michael Mann, told investors. Vega is based in New York and has offices in Madrid. Vega has three core funds, Vega Select, Vega Relative Value Fund and Vega Global Fund, with three so-called feeder funds that trade alongside them.
Data released to investors by the firm Thursday show that this wasn't the only fund hit. Vega Diversified 2x Fund is down almost 15% for the year through September, while Vega Feeder Fund and Vega Global Fund, which Mr. Mann said in the letter had a "similar macro-economic view" to the Vega Select but had taken less risk, each are down more than 5% for the year through September. The other two funds are down less than 1%.
This comes as a number of superstar hedge-fund managers have trouble keeping up with the stock and bond markets this year. One of those, Amaranth Advisors, posted a loss of $6 billion, mostly through the energy markets and through the books of one trader, Brian Hunter.
On average, global macro hedge funds were up 9.23% this year through August and returned 9.25% in 2005, according to index provider Credit Suisse Tremont Index LLC.
Benjamin Mann, a spokesman for Vega, said the firm has no plans to close any of its funds.
The firm at one point had as much as $12 billion in assets under management, but that had shrunk to about $5.8 billion at the end of last year from investor redemptions and poor performance at some of its funds. Assets in its flagship funds are now estimated at around $2.5 billion.
Global macro hedge funds take bets on the world economy through currencies and fixed-income instruments such as government bonds and derivatives. According to Hedge Fund Research Inc., of Chicago, the strategy accounts for about $131 billion of the world's estimated $1.2 trillion in hedge-fund assets.
--Gregory Zuckerman contributed to this article. |
