Ok, so it’s also a secret-sharing algorithm, but regardless, Jeffrey Gendell‘s Tontine Capital is the latest hedge fund casualty, telling clients on Monday that it will liquidate two equities funds.
From Bloomberg, but first reported by CNBC:
Tontine Associates LLC, the investment firm run by Jeffrey Gendell, plans to liquidate two stock hedge funds after they lost more than two-thirds of their value this year, people familiar with the matter said…
Gendell gave no timetable for unwinding the funds, Tontine Capital Partners LP and Tontine Partners LP, during a conference call Nov. 10 with clients, according to the people, who asked not to be named because the information is private. Options for raising cash include selling the funds’ investments privately or pushing the companies in which they are the biggest shareholder to sell themselves.
Tontine, based in Greenwich, Connecticut, had been one of the industry’s best performers, with its four funds returning an average of 38 percent annually since opening. Tontine Capital Partners plunged 77 percent this year through October and Tontine Partners fell 67 percent through September.
The liquidisations aren’t much of a surprise then. But why the drop? And what might be coming onto the market in coming weeks?
Market Folly has a detailed listing of Tontine’s portfolio as of August. Of note, are the positions in steel and infrastructure companies, as well as banks like, err, Goldman Sachs and Merrill Lynch (GS being down 65 per cent this year and MER down 77 per cent).
There’s another hint as to what went wrong, from Gendell’s letter to investors last month:
The combination of falling commodity prices, massive anticipated hedge-fund redemptions and the seizing up of the credit markets cause an enormous dislocation in our portfolios.
Which brings us to one last tontine tidbit, from Wikipedia:
While once very popular in France, Britain, and the United States, tontines have been banned in Britain and the United States due to the incentive for investors to kill one another, thereby increasing their shares.
Related link:
Hedge Fund Tracking: Tontine Partners – Market Folly
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