August 24, 2007 / 5:29 PM / 10 years ago

Hedge fund manager JW Henry spends on new estate

BOSTON, Aug 24 (Reuters) - Hedge fund manager John W. Henry, whose funds have suffered heavy losses this year, bet big on real estate this week with a $16-million bid for an estate near one of his prized investments, the Boston Red Sox.

Norfolk County real estate records show Summera Realty Trust paid $16 million for the estate, which is located only three miles from the American Baseball League team's Fenway Park. It features formal public rooms, a chef's kitchen, swimming pool, media room and staff quarters.

The Boston Herald on Friday described Henry as a college dropout with a gift for numbers who in the past made winning bets on currency, oil and bond markets, and who paid about $700 million for a piece of the Red Sox.

This year, however, Henry's funds have been plagued by a curse of trendless markets and deep losses: his $22 million Global Diversified Portfolio lost nearly 19 percent in the first seven months of the year while his $122 million Financial and Metals Portfolio lost 11 percent through July.

Henry's firm has said on its Web site that investments were hurt by the yen carry trade where investors borrow cheaply in yen to make investments in other, higher-yielding currencies.

The funds' recent losses sparked speculation that Henry might need to sell his Red Sox stake to funnel cash into the funds, where assets have shrunk to about $500 million from $2.5 billion.

But the recent real estate gambit on a home so close to the ballpark may lay those rumors to rest, several hedge fund industry investors said.

It also suggests that hedge fund managers are not yet downsizing their property holdings, even though the average global hedge fund lost nearly 4 percent in August, according to data from Hedge Fund Research.

Many of the industry's most prominent names, including Goldman Sachs (GS.N), have nursed heavy losses after the sub-prime mortgage crisis spread to the stock and bond markets. Many analysts expect dozens of funds to go out of business because of the troubles.

LIFESTYLE CHANGES?

But lifestyle changes may be far off for hedge fund managers, real estate agent David Ogilvy said last week. Ogilvy, who works in Greenwich, Connecticut, where many hedge fund managers live, said if spending cuts are called for, those managers would rather stop using their private jets than put their homes on the market.

Indeed hedge fund manager John Devaney, whose United Capital Markets experienced trouble, is reportedly selling his helicopter and luxury yacht.

But several hedge fund investors said that Henry's latest real estate pursuit could signal things are turning around for his company, which relies heavily on computer-generated models and a lot of volatility to make money.

Henry told the Boston Herald that his firm's Financial and Metals Portfolio is up 15 percent in August.

No one in the firm returned calls to confirm those figures, and a manager at John W. Henry & Co. declined to comment about real estate holdings.

To be sure, some fund managers and industry performance trackers are skeptical about talk of such a fast-paced recovery, even as markets seem to have calmed down.

"I don't think you can turn this around so quickly," said Sol Waksman, president of Barclay Trading Group, which invests in hedge funds and tracks their performance.

Henry's flagship $133 million Strategic Allocation Program, which was off 2.55 percent in July, was flat in early August, said a person familiar with the data but not authorized to speak about it.

Fund manager Axel Merk, who has a background in computer science and is familiar with the types of models John W. Henry and others use, said these programs "all fail at the margins."

"John Henry may not be the only one in trouble, but because of his profile, he just happens to find himself being talked about a lot," Merk said. (Additional reporting by Ilaina Jonas in New York)

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