At the start of 2019, hedge funds have little to be excited about in the new year. For several years, even some of the most reputable funds have faced increasing pressures on their ability to provide expected returns for investors. The pressure has prompted some funds to veer away from the staid management fee structure of two and twenty. Indeed, in the case of some funds, investors would be better off simply tracking the S&P 500 in an index or mutual fund: fees are substantially lower, and sometimes the performance is actually better than an expensive hedge fund.
When investors are disappointed in a hedge fund's performance, they tend not to stick around for too much longer to see if that fund is able to turn things around. Outflows in recent years have been significant. In some cases, hedge funds have even had to close entirely. Below, we'll take a look at some of the highest-profile hedge fund closures in 2018.
Billionaire investor Leon Cooperman's hedge fund, which oversaw about $3.8 billion in assets, announced plans to shut down its traditional operations in July. Cooperman revealed plans to turn the fund into a family office. One branch of Omega, the firm's credit opportunities fund, was intended to remain open, but under a new name, per Bloomberg.
Highfields Capital Management
The Boston-based Highfields, formed in 1998 and managing about $12 billion, was one of the most recent big funds to announce its impending demise. Throughout most of 2018, Highfields' various smaller fund branches lost about 1% overall, as compared with an average 2018 return of 2.3% for equities hedge funds through August of 2018.
Criterion Capital Management
With $2 billion in AUM, San Francisco-based Criterion Capital Management is another prominent fund which will soon close. Criterion has 16 years of experience but was unable to sustain itself after a prolonged period of several years in which the fund failed to achieve its return targets.
Tourbillion Capital Partners
Jason Karp, the founder of Tourbillion Capital Partners, decided to close down his fund after six years. In an October announcement, Karp indicated plans to return more than $1 billion to investors by the end of 2018. Tourbillion had performed well in its first three years after its 2012 founding. However, in more recent years he had failed to meet management and investor expectations.
Jabre Capital Partners
Jabre Capital Partners, the hedge fund of Philippe Jabre, announced plans to shutter and return client money for three funds in December 2018. As of April, the Swiss firm managed roughly $1.2 billion in assets. However, Jabre indicated that the market was becoming increasingly difficult to anticipate, and after 12 years in business determined the best course of action was to close.