Arience Capital to Shut Hedge Fund on ‘Incompatible’ Markets

Date: Friday, December 12, 2008
Author: Saijel Kishan, Bloomberg

Arience Capital Management LP, a New York-based hedge-fund firm run by Caryn Seidman-Becker, is closing its sole fund because markets are “incompatible” with its investment style.

Arience, which manages more than $1 billion, plans to shut down by Dec. 31 and return about 95 percent of investors’ money by the end of January, according to a letter sent to investors yesterday. The remaining assets will be paid after the firm’s 2008 audit has been completed.

“We do not currently see a clear path to employ our disciplined process and gain the necessary conviction to become reinvested,” Seidman-Becker said in a letter, a copy of which was obtained by Bloomberg News. “This decision stems from our belief that the current market environment is incompatible with our investment style and process.”

Hedge funds are in their worst year in almost two decades, losing an average of 18 percent through November, according to Hedge Fund Research Inc. of Chicago. Firms including Ospraie Management LLC, Drake Management LLC and Sunova Capital LP are liquidating hedge funds after posting losses this year.

“For the past two months we have been deeply underinvested,” Seidman-Becker said in the letter. “We do not feel it is appropriate to sit with cash and collect management fees.”

Jonathan Gasthalter, a spokesman for Arience, declined to comment.

An estimated 700 funds may go out of business by the end of the year, an increase of 24 percent from 2007, according to Hedge Fund Research.

Evaluating Markets

Arience will evaluate the markets and, if the firm starts investing again, it will honor any “high-water marks,” she said, referring to the level at which a fund must make up previous losses before charging investors a performance fee.

Arience said it has returned 33 percent to investors since March 2003. Seidman-Becker, who founded the firm the previous year, was previously a partner at Lawrence Robbins’s Glenview Capital Partners LP and had worked at Iridian Asset Management LLC, where she was responsible for industries including media, defense and leisure. Before that, Seidman-Becker was an analyst at Arnhold & S. Bleichroeder Advisers LLC.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net