A Look at the Hedge Funds That Closed

Date: Friday, March 20, 2009
Author: Cyrus Sanati, DealBook

Hundreds of hedge funds and funds of hedge funds shut their doors last year as the fallout from the global financial crisis and Bernard L. Madoff’s $65 billion Ponzi scheme proved to be too much to bear.

In North America, more than 200 hedge funds or fund families, which at their height managed a combined $84 billion in assets, decided to shut down, according to recently released research by HedgeFund Intelligence. That is four and a half times the $18.7 billion in assets once managed by the 48 American funds that closed in 2007.

On a net basis, the total number of hedge funds fell by 8 percent last year to 9,284, according to a different report, from Hedge Fund Research, cited by Reuters on Wednesday.

The biggest loser of the year was Fairfield Greenwich’s $6.9 billion Sentry Fund, which fed money exclusively to the Madoff incinerator. Fairfield’s other funds had around $7 billion in them and experienced heavy losses as well because of the chaotic market.

Tremont Group’s Rye family of funds, which included more than 10 vehicles, may be out more than $3.1 billion because of Mr. Madoff, which put it at No. 9 in HedgeFund Intelligence’s list of last year’s biggest flame-outs. In tenth place was Kingate Management’s Kingate Global fund, with $2.7 billion and also a Madoff problem.

Many firms that closed last year did not have Madoff exposure, of course. Coming in at No. 2 on the top 10 list was Drake Management, with $4.7 billion in assets under management at its peak. The firm decided to shut down after it failed to get enough support from investors.

Citigroup’s Old Lane Partners closed in July after its manager, Vikram S. Pandit, took over as Citi’s chief executive and its co-founder, John Havens, was named head of investment banking. Citi paid $800 million for the hedge fund in 2007 and Mr. Pandit personally pocketed $80 million. The fund suffered from mediocre returns and was closed to conserve capital.

Below, Absolute Return magazine’s top 10 hedge fund closures of 2008.