Long/short credit hedge fund Lutetium Capital has liquidated its portfolio and is in the process of returning investors’ capital following a wave of redemptions, according to co-founder Michael Carley.
“The letter to investors went out week before last,” Carley, UBS’ former distressed debt co-head, told CIO. “I’m already all in cash.”
He anticipated finishing client refunds by next week.
The Stamford, Connecticut-based firm had roughly $150 million under management, three-quarters of which came from a liquid alternatives vehicle. Most of those investors exercised their right to quick redemptions over the past year, and pulled their assets.
“Over the last three years, nobody wanted anything to do with credit,” Carley said. Agreeing to liquid alts terms, he said, was “a good way to get assets under management. The money came in very quickly, and rolled out even faster.”
Unlike investors in Third Avenue Management’s supposedly liquid credit mutual fund—which set off panic after freezing withdrawals—Lutetium’s clients got what they paid for.
“They deal was, when they call me and ask for their money back, I give it to them in five days,” Carley explained of his liquid alts clients. “I promised will provide it to them in five days, and I did.”
A recent report from data firm eVestment said that demand for hedge fund credit strategies had “evaporated” in 2015.