By Ben Dummett Of DOW JONES NEWSWIRES TORONTO -(Dow Jones)- Turbulent market conditions have claimed another Canadian hedge fund.
Arrow Hedge Partners Inc., a fund of hedge funds overseeing a total of about C$662.8 million in assets, is winding down its struggling C$7.7 million Arrow Elmwood Fund, with plans to return investors' money at the end of November.
This is the second fund Arrow Hedge has moved to collapse in recent weeks. Late last month, Arrow announced plans to unwind the C$35.6 million Arrow Epic Capital Fund after Epic Capital decided to unwind its C$160 million Canadian Limited Partnership fund and its offshore fund. Fund redemptions had increased the relative weightings of these hard-to-value illiquid holdings to abnormally high and thus risky levels. As of Oct. 28, Epic's Limited Partnership fund was down almost 38%.
In addition, early this week Lawrence Partners told investors of its Lawrence Partners Fund that it was temporarily suspending redemptions for 60 days following steep losses for the first 10 months of the year.
The demise of the Arrow Elmwood fund stems from a combination of its small size, its exposure to the poorly performing and relatively illiquid small- and micro-capitalized technology stocks, and investors' increasing wariness of hedge funds in general as a result of ongoing market volatility.
The Arrow Elmwood Fund is down almost 41% so far this year, according to Globefund.
"People are literally gunning everything," said James McGovern, Arrow Hedge Partners' chief executive, in reference to the widespread selling of stocks from what many consider already depressed levels.
"The good news is we have hugely reduced the fund's equity exposure," by selling holdings to raise cash since early October.
Elmwood Capital, based in Milton, Ont. is managed by Rick Serafini and Scott Coleman. It was founded in 2001. In addition to the Arrow Elmwood Fund, the managers also oversee a small limited partnership fund, but that product will also be wound down, McGovern said. Serafini couldn't immediately be reached for comment.
McGovern believes a number of small hedge funds are doomed in the current climate in which a lack of liquidity for a range of asset classes reigns.
"The forced selling" that hedge funds face as a result of increasingly jittery investors seeking to redeem their investments and the absence of bids for stocks places pressure on performance and stymies any effort to attract new funds, McGovern said.
"If you are small fund you have to think hard if you want to stick through multiple years of little to no growth," McGovern said.
Company Web Site: http://www.arrowhedge.com
-Ben Dummett, Dow Jones Newswires; 416-306-2024; ben.dummett@dowjones.com
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(END) Dow Jones Newswires
November 13, 2008 17:14 ET (22:14 GMT)

Publié le 13 novembre 2008 Copyright © 2008 Dowjones