The slow-motion trainwreck that is the hedge fund investing world, which as we documented one month ago has failed miserably – if predictably – to compensate LPs for its 2 and 20 model, and generate outsized returns during a regime of central planning, having created zero alpha since 2011…
…. took its latest casualty in the form of the once-iconic hedge fund Perry Capital. While it has not unwound just yet, the 28-year-old hedge fund run by Goldman alum Richard Perry, has lost more than half of its assets in less than a year after posting declines since 2014.
According to Bloomberg, the firm’s assets slumped to $4 billion as of the end of August compared with $10 billion in September last year. The reason for the tremendous outflows is that Perry has posted losses of 18.4% from the beginning of 2014 through July of this year. The fund declined 2.6% in the first seven months of this year after losing 12.6% in 2015.
Curiously, as on numerous previous occasions, while Perry’s losses aren’t even that substantial, in a time when the S&P500 just can’t go negative courtesy of central banks, LPs patiene has become non-existent (however, a shocking outlier in this regard is Bill Ackman’s Pershing Square, where the LPs have continued to amaze the investing community by not redeeming what’s left of their assets despite one terrible investment decision after another).
What is even more notable about Perry, is that the firm had never had a losing year from its 1988 inception through 2007, when it managed $14 billion. Perry, 61, had previously worked on Goldman’s risk-arbitrage desk, which was once led by Robert Rubin, who later became U.S. Treasury secretary. The team spawned a group of hedge fund managers that included Frank Brosens, who co-founded Taconic Capital Advisors, and Eric Mindich of Eton Park Capital Management.
Perry’s core competency is “event-driven”, with a focus on merger arb, takeovers and bankruptcies.
As Bloomberg adds, Perry Capital is among the managers including Tudor Investment Corp. and Brevan Howard Asset Management that have seen investors flee. The $2.9 trillion hedge-fund industry has come under fire this year for everything from excessive fees to lackluster returns, with investors pulling the most money since the aftermath of the global financial crisis.
Finally, here is the latest hedge top and bottom 20 hedge fund performance breakdown courtesy of HSBC.