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Deephaven to liquidate funds worth $780 million

HedgeCo.Net (West Palm Beach) – Amidst pressure from investors, Minnesota-based Deephaven Capital management is closing its doors on two of its funds worth over $780 million.

Deephaven’s parent company, Knight Capital Group, sought to freeze redemptions from the fund after its recent lackluster performance prompted 70% of its investors to cash out.

A rep for Deephaven cited several reasons for closing the funds, including the current “macro-economic environment.”

[The fund] “is unlikely to produce the type of investment results Deephaven and our investors might expect over the short and intermediate term,” said  CEO Colin Smith in a letter to investors today. 

Deephaven Capital Management was started in 1994 with $5 million in assets.  As of early this year, they managed about $4 billion through six different hedge funds.  However, they have seen a 6% decrease over the past 6 weeks.

The liquidation will start dispersing assets slowly, and Deephaven hopes that by May, investors will have received at least half of their money back.

Andrew Greenberg, who headed the portfolio for the Deephaven funds, has been laid-off one year into his three-year deal.  Tony Chedraoui, who heads Deephaven’s European Events portfolio, will replace Greenberg.

This isn’t the first time Deephaven has been in hot water.  In 2005, the SEC targeted them in an investigation involving shady trading activities associated with Private Investments in Public Equities (PIPEs).  Deephaven ended up settling the civil allegations by paying a $5.8 million fine.

Julie Scuderi
Contributing Editor for HedgeCo.Net
Email: julie@hedgeco.net

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