Drake Management is to close its $2.5bn flagship hedge fund after investors failed to stump up enough to keep the formerly high-flying New York fund operating.
James Mackintosh reports in the FT:
Drake, which manages about $11bn including long-only money, told investors in a letter on Wednesday night that it had decided to wind down the fund over the next year, but would launch a follow-on fund for those who wanted to stay with the firm.
Drake was trying to secure backing at a difficult time, when many investors want to realise cash. The industry had its lowest inflows for years in the first quarter, and many big funds are facing heavy redemptions.
So the curse of extraordinary outperformance strikes again - Drake’s flagship fund returned 41 per cent in 2006 on global macro bets. It hit trouble at the end of last year, after losses prompted $1bn in redemption requests. The global macro fund finished the year down 24 per cent.
Unlike in some other high profile failures, such as Peloton, investors have effectively pulled the plug on Drake’s fund rather than the banks. But then Drake, founded by former BlackRock executives Anthony Faillace and Steven Luttrell, took the unusually democratic step of asking investors what they wanted to happen, rather than just suspending withdrawals.
The investor letter is on its way to Alphaville HQ.
Related links
Drake winds down hedge fund - FT.com
