JO Hambro Shuts Hedge Fund After VW-Porsche Trade (Update2)
By Tom Cahill
Nov. 19 (Bloomberg) -- JO Hambro Capital Management Ltd., which oversees about $3.5 billion of assets, will close one of its two hedge funds partly because a bet against Volkswagen AG shares backfired, people familiar with the situation said.
The $240 million Trident European Fund dropped 25 percent in October, its worst month since starting a decade ago, mainly after a bet on a drop in Volkswagen shares went awry, said the people, who declined to be identified because the firm doesn't disclose returns. The fund has slumped 39 percent this year after posting average returns of 8.4 percent annually since its inception.
Poor performance, dollar gains sapping European investment returns and investors moving assets from medium-sized companies all contributed to the fund's closure, Suzy Neubert, a spokeswoman for JO Hambro in London, said in an e-mailed statement.
Dozens of investors, including Germany's billionaire Merckle family, suffered losses last month when Volkswagen shares surged fourfold after Porsche SE said it had options allowing it to raise its stake in the carmaker to 75 percent. Porsche's announcement forced short-sellers to cover positions in a so-called short squeeze, where investors who had sold borrowed shares rushed to buy them back to limit losses.
``For a highly competitive space like the European equity long-short strategy, being down 40 percent for the year is probably fatal,'' said Taco Sieburgh Sjoerdsma, director of research at Liability Solutions, a hedge fund consultant. ``Attracting new capital would be challenging, redemptions would rise, and there would be no performance fees due for a long period of time.''
Short Squeeze
Trident European Fund manager Basil Postan didn't return calls seeking comment.
Volkswagen had been the most shorted stock in Germany's benchmark DAX Index. While the short squeeze on VW hurt many funds, Trident European is the first known to have gone out business in part because of the trade, according to Nick Evans, editor of EuroHedge, a publication of Hedge Fund Intelligence, which tracks the performance of more than 11,000 hedge funds and funds of hedge funds.
The Merckle family was also stung by losses on Volkswagen, people familiar with the situation said.
EuroHedge's index of Long-Short European equity hedge funds dropped 1.7 percent in October, bringing the strategy's decline for the year to 8.5 percent, Evans said. Hedge funds overall have dropped 16 percent through October, according to Hedge Fund Research Inc.
Voluntary Liquidation
The board ``has concluded that the fund should be wound down and placed in voluntary liquidation,'' Trident European said in a statement to the Irish Stock Exchange.
Nichola Pease, deputy chairman of JO Hambro, is married to Crispin Odey, head of Odey Asset Management LLP, which also suffered in the Volkswagen trade. Odey European Inc. dropped 2.6 percent in October, trimming this year's gains to 3.4 percent, according to filings.
The firm also runs the Trident North Atlantic Fund. The rest of its investments are in mutual funds and private equity funds.
To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net
Last Updated: November 19, 2008 12:02 EST
bloomberg.com |
