Matrix withdraws Gottex mandate

Date: Friday, November 28, 2008
Author: David Walker, Wealth Bulletin

London asset manager Matrix is to remove peer Gottex Fund Management from managing one of its portfolios after Gottex suspended redemptions from two of its own products in which Matrix invests. The move marks an escalation in an increasingly uneasy relationships between managers involved in the troubled $1.6bn (€1.2bn) hedge fund industry.

Bridget Guerin, one of the directors on the Matrix Bastion fund of hedge funds and a director at the firm, said Bastion's board would replace Gottex as manager with Matrix's own inhouse fund of hedge funds management team, headed by Stewart Ratcliff.

Guerin said Bastion's board made the decision partly because Gottex had temporarily suspended redemptions from the Gottex Market Neutral and Gottex Market Neutral Plus funds, in which all of Bastion's $28m is invested. As a result Matrix has suspended redemptions from Bastion, from December. Bastion has also filed to redeem all its money from Gottex, Guerin said.

She said: "Our suspension was completely contingent on the decision by Gottex to suspend redemptions on their funds. If we get a redemption request from an investor for Bastion, we put a corresponding request into the underlying Gottex funds. If we can't get money back from Gottex we can't get the money out of thin air." When Gottex resumes paying out, so too will Bastion, Guerin said.

When it suspended withdrawals from some of its funds in mid-November Gottex said it did so to "protect redeemnig and remaining investors" and that it hoped to begin processing redemptions again next April, depending on market conditions. It added that the standard 45-day delay before satisfying requests for payouts from some of its funds of hedge funds in October and November would be lengthened by a further 55 days.

Bastion's board also expressed displeasure with the fact Gottex had removed or scaled back activities that aimed to nullify the effect of currency fluctuations between sterling - with which UK citizens invest in hedge funds - and US dollars, the currency in which those hedge funds typically invest in financial markets. It is believed Gottex has reinstated the currency hedges last Tuesday.

Gottex has not been the only fund of hedge funds to reduce its currency hedging programs. London's Dexion Capital has also done so for some of its funds of hedge funds.

Bastion's board said it "no longer believes that it is in the best interests of the shareholders (of Bastion) for Gottex to remain as investment manager". This decision marks a further deterioration in the relationship, already sorely tested, between the various managers of hedge fund assets.

Last week Sandra Manzke, founder of US fund of hedge funds Maxam Capital Management and an investor in hedge funds since 1985, openly expressed her displeasure at hedge funds disallowing their investors to pull all their money out.

She said: "many funds are now facing a suspension of redemptions which will scare investors away from alternative products."

She added that she was "appalled and disgusted" by the way some hedge fund managers were pursuing self-interest at what she regarded as the expense of their investors.

Gottex declined to comment.

--write to dwalker@efinancialnews.com