Exclusive: China's CITIC backs new fund set up by ex-FX Concepts execs

NEW YORK Wed Jan 15, 2014 4:41pm EST

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NEW YORK (Reuters) - CITIC Capital Holdings Ltd, a unit of China's sovereign wealth fund, has invested in a new U.S.-based asset management fund set up by former executives of bankrupt hedge fund FX Concepts, two sources familiar with the matter said on Wednesday.

The new fund will be run by Bob Savage, FX Concepts' former chief operating officer and chief strategist, and Ron DiRusso, the firm's co-chief investment officer and director of research. DiRusso had also managed FX Concepts' volatility fund, one of the few funds that performed well near the end of the firm's run.

CITIC Capital manages more than $4 billion in assets. Its primary owners are China Investment Corp, with assets of roughly $575 billion, and Citic Group Corp, China's largest conglomerate.

The sources did not indicate how much Citic has invested in the new outfit, but that it will "definitely manage money." The sources asked to be anonymous because they are not authorized to talk to the media.

Savage did not respond to emails and phone calls from Reuters, although late last year he said he would be part of a new venture in 2014.

Negotiations with Citic began as far back as February last year, one of the sources said, when FX Concepts was already floundering. FX Concepts was once the largest currency hedge fund in the world. At its peak in 2007, it managed $14 billion in assets.

Citic was offered the opportunity to invest in the new fund by DiRusso's Hong Kong-based contact, a former Goldman Sachs employee, one of the sources said. DiRusso and Savage had previously worked at the Wall Street firm at separate times.

It is not clear what type of fund Savage and DiRusso would manage. The same source said Savage and DiRusso's new firm intends to operate like a hedge fund, although it does not have quantitative models yet to back up its strategies.

The new outfit has also hired some of the junior employees of FX Concepts.

ACRIMONIOUS PARTING?

Both sources said the new venture, which has offices in Manhattan, was negotiated without the knowledge of FX Concepts founder and patriarch John Taylor, who declined to be interviewed for this article.

The parting between Taylor and his former lieutenants was said to be acrimonious.

One source said Taylor had "lost control of the company since the summer." Taylor was said to be unhappy with Savage acting as spokesperson for FX Concepts when the firm's financial trouble started to surface in various media reports in the third and fourth quarters up to the time it filed for bankruptcy on October 17.

FX Concepts bought Savage's research company called Track.Com in September 2012, for a reported $5 million in FX Concepts shares that became worthless as the hedge fund imploded, the sources said.

FX Concepts filed for bankruptcy in October last year following poor returns due to the weak performance of its systematic trading business.

As returns dwindled, investors withdrew. The final blow came in early September when the San Francisco Employee Retirement System gave notice that it was redeeming its investment in full. That investment accounted for 66 percent of FX Concepts' total assets under management at that point.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Richard Chang)

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