Satellite Hedge Fund Said to Shut After Withdrawals

Date: Monday, May 11, 2009
Author: Saijel Kishan, Bloomberg

Satellite Asset Management LP, a $3 billion hedge fund founded by former employees of billionaire George Soros, is closing down because of client withdrawals, according to a person familiar with the matter.

The New York-based firm has started returning money to investors from its three funds, Satellite Overseas Fund Ltd., Satellite Fund II LP and Satellite Credit Opportunities Ltd., which together had $2.8 billion, said the person, who asked not to be named because the information is private. Lief Rosenblatt, 55, a Satellite founder, didn’t respond to a call or an e-mail seeking comment.

Satellite, which oversaw about $7 billion at the end of 2007, was started 10 years ago by Rosenblatt, Gabe Nechamkin and Mark Sonnino, who worked together at Soros Fund Management LP. Satellite in November halted client withdrawals from its funds, which lost more than 35 percent last year, the person said.

“You can’t suspend redemptions forever,” said Jeremy Walton, head of fund disputes at law firm Appleby Global in the Cayman Islands. “If there’s no scope for trading out of positions or creating liquidity to meet redemptions, then funds have little choice but to shut down.”

The firm’s $1.5 billion Satellite Overseas Fund Ltd., its largest, returned about 6.7 percent this year through April, said the person. Satellite has about 50 employees, down from about 120 people at the start of last year.

Shut Down

A record 1,471 hedge funds, or 15 percent, of the industry, shut down last year after managers posted record losses, according to Hedge Fund Research Inc. Peloton Partners LLP, the London-based firm run by former Goldman Sachs Group Inc. partners, and Ospraie Management LLC, run by Dwight Anderson in New York, were among the firms that shut down funds last year.

Hedge funds, private, largely unregulated pools of capital whose managers can buy or sell any assets, have returned 4.2 percent this year, according to Hedge Fund Research.

Investors pulled $103 billion from hedge funds in the first quarter, leaving the industry with $1.3 trillion, the Chicago- based researcher said. To stem withdrawals, about 17 percent of funds had restricted redemptions as of March 31, Credit Suisse Group AG said in a report.

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