From the June 5 WSJ
I don’t think much comment is necessary other than my bolds and my one observation noted in in bold italics. But this is not really atypical of the hedge fund industry
Drake Capital Management
Ending Two Hedge Funds
By MARGOT PATRICK
LONDON -- Drake Capital Management LLC is to return roughly $4 billion to investors within the next year, after deciding to wind down its two remaining hedge funds this week.
But showing that heavy losses are no barrier for re-entry in the hedge-fund world, the New York-based firm said it will start accepting cash later this year for new funds following "substantially similar" strategies.
The closure of the two funds comes after Drake told investors in late April it would shut its flagship $2.5 billion Global Opportunities Fund. The firm, a specialist in fixed-income and global-macro investment strategies, had managed as much as $6 billion across the three hedge funds before losing about $2 billion over the past 17 months from poor performance and investor redemptions……
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In a filing to the Irish Stock Exchange late Tuesday, Drake assured investors there wouldn't be a fire sale of assets, saying the portfolios are "well-positioned to avoid forced sales." A spokesman for the firm declined to make any further comment Wednesday about the funds' closure.
Most investors in the three Drake funds had already asked for their money back after last year's heavy performance losses. In an effort to guard against further losses from asset liquidations to meet the requests, Drake suspended redemptions on the funds earlier this year.
Drake Capital Management was founded in 2001 by Anthony Faillace, who had worked for BlackRock Inc. and bond giant Pacific Investment Management Co., and Steve Luttrell, a former BlackRock director who had also worked at Pimco. Mr. Faillace, the firm's chief investment officer, was lauded for making savvy bets on interest rates and currencies after the Global Opportunities fund clocked a 41% return in 2006.
Global Opportunities went on to lose nearly one-quarter of its capital in 2007,(that gives an investor who was in for 2 years a total return of 5.75%, for the unfortunate soul that chased the 2006 performance and began investing in 2007 he would have to earn 33% on his capital before getting back to breakeven )and Absolute Return was down 14% for the year. Global Opportunities had dropped a further 5% as of mid-May, and Absolute Return was off 12% as of mid-April, according to performance data reviewed by Dow Jones Newswires.
Drake continues to manage several billion dollars in long-only mandates and funds. According to its Web site, total assets under management are more than $10 billion.
As they say risk and return are almost always linked.
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