Peloton Partners, which last year had one of London’s best performing hedge funds thanks to a bet against US subprime, is liquidating its $2bn ABS fund as a result of the continued deterioration in asset values.
No details yet of how much it lost, with the letter saying only “severe declines” in value, but with banks hawking the book to rival funds there can’t be much left for hapless investors.
The fund, run by former Goldman Sachs partners Ron Beller and Geoff Grant, was known to be highly volatile, and posted an 87 per cent return last year on the back of a tough 2006. Peloton’s $1.6bn multi-strategy fund was also up 27 per cent, thanks in part to its large investment in the ABS fund.
But 2008 has not been so kind. And prime brokers have tightened the vice. As a result, Peloton has also suspended NAV calculations and redemptions from the multi-strategy fund - the future of which also sounds in doubt. Judging by the tone taken below, there’s more than a little bad feeling harboured against their bankers.
Of course, there’s an award-related embarrassment here. Peloton ABS won the credit award, as well as the new fund of the year award for non-equity strategies, at last month’s EuroHedge gongs.
Every hedge fund collapse makes headlines but Beller’s past life as a wealthy victim of theft is likely to put Peloton at the top of the tabloids - remember Joyti De-Laurey nicking millions from a bunch of rich Goldman bankers who didn’t notice for years? Beller was one of them.
Helen Thomas and James Mackintosh
The Peloton letter to its multi-strategy investors - emphasis ours:
28 February 2008
Dear investor
Peloton Multi-Strategy Fund (the “Fund”)
We are writing to you as founders and co-managing partners of Peloton Partners and at the request of the Directors of the Fund.
As you are aware the Fund has a very large position in the Peloton ABS Fund. We are writing to inform you that we have today had to take steps to attempt to realise the Peloton ABS Master Fund’s portfolio.
As you may also be aware, the Peloton ABS Fund, which has delivered excellent performance since inception, has recently experienced difficulties in the challenging credit markets. Although there has not been any material deterioration in the credit quality of the Peloton ABS Fund’s assets, given the current liquidity situation in the asset backed securities market the Peloton ABS Fund has experienced severe NAV declines. In addition, because of their own well-publicized issues, credit providers have been severely tightening terms without regard to the creditworthiness or track record of individual firms which has compounded our difficulties and made it impossible to meet margin calls.
We have been working night and day exploring every feasible option to alleviate the situation. In the end the best solution has been to seek buyers and we have been actively pursing this option and many others in an effort to stabilise the situation.
The problems for the Peloton ABS Fund have had a serious negative impact on the Multi-Strategy Fund and we are currently assessing our options.In order to protect the interests of stakeholders, the Directors have determined to suspend the calculation of Net Asset Value, subscriptions and redemptions with immediate effect and until further notice.
You will understand that in the circumstances we are limited in what further we can say at this time. However, we will keep you informed to the extent we are able. We deeply regret recent events and appreciate your patience and understanding in these difficult times.
Yours Sincerely
Ron Beller
Geoffrey Grant
