Home ListingJanuary 5, 2016

Nevsky Capital Shuts $1.5B Equity Long-Short Fund

The London-based hedge fund has announced liquidation.

Reported by Featured Author

London-based Nevsky Capital has announced it will shut its flagship $1.5 billion hedge fund and return cash to its investors.

The firm said adverse market conditions and increased computer-driven trading by index funds have led to the long/short global equity product’s demise after 15 years.

“It is more difficult than ever before for us to accurately forecast macroeconomic and corporate variables.”“We have come regretfully to the conclusion that the current algorithmically driven market environment is one which is increasingly incompatible with our fundamental, research-oriented investment process,” CIO Martin Taylor said in a release.

Nevsky projected continued challenges for emerging and developed markets due to the US Federal Reserve’s rate rises outpacing market discounting, and China’s slowing growth.

The soon-to-close Nevsky Fund returned 18.4% annually since its inception in September 2000, according to firm data, compared to 2.5% for an average hedge fund for the same time period.

But recent performance has been lackluster: the flagship lost 1.4% in 2014 and gained 0.4% in 2015, as shown in a December 2015 investor letter acquired by ZeroHedge.

“It is more difficult than ever before for us to accurately forecast macroeconomic and corporate variables,” Nevsky wrote in the letter. “This pushes up our cost of capital and substantially increases the risk of us suffering substantial capital loss on individual positions.”

Various trends contributed to the fund’s closing, Taylor continued, including deteriorating data quality, declining transparency in economic policy and equity markets, and increasing tail risk.

“This has made what we enjoy most—the thrill of analyzing economic data releases and company accounts—no longer enjoyable,” the letter said.

The firm told CIO investors have until end of February to redeem their shares.

Nevsky is the latest in a string of hedge funds closures.

Long/short credit specialist Lutetium Capital revealed Monday it had liquidated its $150 million portfolio. In December, $8 billion BlueCrest Capital Management announced it was returning investor capital and turning into a family office.