Investors pull $2.5 bln from Horseman hedge funds

Date: Thursday, March 11, 2010
Author: Reuters

Hedge fund Horseman Capital has lost more than half its assets as clients pulled out $2.5 billion after star manager John Horseman decided to stand down, a sign of the key-man risk that haunts the industry. Clients withdrew the assets at the start of January, a spokesman said, the first opportunity they had to exit after the firm announced 51 year-old Horseman would cease day-to-day fund management but remain as CEO. [ID:nLC549274]

"We had redemptions on the back of the announcement made last year," the spokesman said. "Investors were allowed to redeem on January 4, and that's when the bulk of the redemptions took place."

The bulk of the outflows were from Horseman's main Global fund, which has fallen to just $535 million in size from $2.8 billion in November. The fund profited in a choppy 2008 but lost 24.7 percent in last year's bull market.

The withdrawals illustrate how highly star hedge fund managers are prized by clients and how reliant many firms are on just one or two individuals.

Horseman, the majority shareholder in the firm, made gains of more than 25 percent in 2006 and more than 30 percent in 2007 and 2008, but bad bets last year saw him lose money when the average long-short equity fund returned nearly 20 percent.

The redemptions come as investors are slowly returning to the wider hedge fund industry. Clients invested a net $13.8 billion into hedge funds in the fourth quarter of last year, according to Hedge Fund Research.

The withdrawals helped slash Horseman Capital's total assets under management to $1.3 billion at the end of February from $4.6 billion at the end of October. However, the spokesman said redemptions had slowed down "massively" and were likely to be "quite small" in April.

Horseman Global was passed at the end of last year to Russell Clark, who has so far made gains of 0.55 percent in January and February, ahead of an estimated 0.06 percent gain from the average long-short equity fund, according to Credit Suisse/Tremont.