Octavian Advisors, a hedge fund that focused on distressed investments, has decided to shutter its operations following some big losses.
"While we have significantly outperformed the international equity markets we focus on over a multi-year period, we have not generated attractive absolute returns in an exceptionally difficult environment. The last eighteen months have been particularly difficult," the firm wrote to clients, as reported by Reuters, which also reported that the fund was down 11 percent through August.
Is an 11 percent loss enough to cause most billion hedge funds to shut down, and return funds to limited partners? Lots of funds have suffered worse. Just look at John Paulson, his flagship funds have been hit with even bigger losses. While the two funds have fared well recently, they are still down for the year, and after a disastrous 2011, it will be a long time before they get back to their high water marks.
So is Octavian pulling the trigger a bit early? Shouldn't they be willing to stick it out?
It's hard to know what went into the decision-making process. One could argue that the managers looked into the future and just couldn't see a path to outsized gains, though once-toxic assets seem to be faring better now. Management might have decided that trying to get back to even would take forever, so why not throw in the towel and avoid the chance of bigger losses for investors later.
It's also possible that the funds' losses are bigger than publicly known, and perhaps extend for a longer time horizon. In any case, more funds have been shuttering this year, compared with last year. Each no doubt has a different story to tell.
- here's the article