The shrinking hedge fund universe has claimed two more victims.
Quantitative hedge fund Amplitude Capital, bruised by two years of losses in one of its main money pools, is returning client money after investor withdrawals sparked a plunge in assets, while Manuel Blanco, who previously managed money for the likes of Highbridge Capital Management and Balyasny Asset Management, is shutting down his hedge fund Sator Square Capital Management after failing to raise enough money.
More hedge funds have shut than started in each of the last three years and the number of startups in 2018 collapsed to the lowest level in 18 years, according to data compiled by Eurekahedge and Hedge Fund Research. Mounting costs, a tough capital raising environment and investors’ reluctance to keep paying high fees mean that an increasing number of experienced managers are weighing their options.
“It is better to be a great portfolio manager within an existing firm than trying to build up your own firm to have your name on the door,” said Hilmi Unver, founder and managing partner of TLOS Finance, a Geneva-based investment advisor focused on hedge funds. “The life expectancy for new funds is very low.”
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Following criticism for its faulty 2016 election algorithms, the firm appointed a new research director to collaborate with its quants and money managers.
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The recent plunge raised suspicions that quants had caused or exacerbated the sell-off.
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Despite returns of about 8% last year, the products lagged behind the S&P 500’s 22% climb.
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The pressure is mounting even as performance improves. Hedge funds returned just over 7% on average in the first four months of 2019, their best start to the year since 2006, according to Hedge Fund Research.
Amplitude stopped trading in April, said a person familiar with the matter, asking not to be identified because the information is private. The Zug, Switzerland-based firm managed about $1.75 billion until recently but outflows cut the firm’s assets to $860 million at the end of March, according to another person.
Emails and calls to Amplitude’s founder Karsten Schroeder remained unanswered.
Blanco’s Sator Square only managed about $20 million before taking the decision to close the fund, separate people familiar with the matter said, asking not to be identified because the information is private.
A representative for Sator Square declined to comment.
The firms join the likes of Nektar Asset Management, Rubicon Fund Management and Azentus Capital Management in shutting funds or returning money to investors this year. — Additional reporting from Manuel Baigorri
