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UK hedge fund firm Eddington Capital to shut down

Date: Monday, August 16, 2010
Author: Laurence Fletcher, Reuters

Firm to wind down funds then shut down

Clients have withdrawn assets over past two years

Performance beat peers in 2008, flat in '09 and '10

UK hedge fund firm Eddington Capital is to shut down and return capital to clients after failing to attract cash inflows, as nervous investors continue to shun all but the best-performing managers.

The firm, set up in 2003 as a joint venture between management and Caledonia Investments (CLDN.L), will wind down its funds after seeing assets fall to $115 million from a peak of $265 million in 2008, chief executive Glenn Baggley said.

Eddington's demise illustrates the problems facing smaller hedge fund firms, which have struggled to attract assets in recent years as investors have opted for the perceived safety of larger firms.

"The funds have been losing assets gradually over the last 24 months. They've reached a level that can no longer be sustained," Baggley told Reuters.

He said Eddington's Macro Opportunities fund of funds rose 22 percent in 2008 -- a year in which the average fund fell about 19 percent -- while its Triple Alpha fund of funds also outperformed peers.

However, during 2009's market rally and so far in 2010, both funds' performance was roughly flat.

"Fantastic performance doesn't necessarily translate into being able to raise assets," he said.

"You'd think they were doing what funds of funds and hedge funds were intended to do -- preserve capital in difficult times. Investors were looking more at 2009 performance."