Pequot shuts three small hedge funds, managers out
By Svea Herbst-Bayliss
BOSTON, Nov 28 (Reuters) - Hedge fund firm Pequot Capital Management, whose flagship fund gained 37 percent this year, will soon shut down three smaller portfolios due to "poor" performance and meager assets, two people said on Wednesday.
The $7.5 billion hedge fund firm will shutter its Strategic Equity Fund, its Event Driven Fund and its Dynamic Strategies Fund and allow investors in those portfolios to roll their money into Pequot's other core funds, said one person familiar with the matter but not authorized to speak about it.
The move comes at a time many investors in the $2 trillion hedge fund industry are expecting to see hundreds of smaller funds die a quiet death this year as it becomes ever harder to raise money and lackluster returns are making it less profitable to run one of these loosely regulated funds.
The three Pequot funds are managed in San Francisco and had pulled in only a few hundred million in assets since they were launched in 2006. The funds are expected to be shut at the end of the year.
The Event Driven Fund, run by Steve Pigott, lost 1.1 percent during the first 10 months of 2007 and one person said declines there had increased in recent weeks. Performance data for the other two funds were not available.
With their funds facing a quick end to their short lives, portfolio managers Steve Pigott and Carson Levit, who runs the Strategic Equity Fund, will leave Pequot.
Both men joined the Westport, Connecticut-based firm from Chicago-based hedge fund powerhouse Citadel Investment Group with great fanfare about two years ago.
But Pequot's founder Art Samberg, who co-manages the flagship $2.6 billion Core Global Fund with Mike Corasaniti, has a reputation for demanding top performance fast and not waiting around long to see improvement in lagging funds.
To relieve stress, Samberg had a half basketball court built near the fund's East Coast trading floor.
Peter Labon, a third fund manager in the San Francisco office who also previously worked at Citadel and runs Pequot's Dynamic Strategies Fund with Pigott and Levit, will stay with Pequot.
A spokesman for Pequot declined to comment on the matter.
For Pequot the decision to close the funds may not have a significant impact on its overall assets because much of the money could be rolled into more profitable portfolios, one person said. (Reporting by Svea Herbst-Bayliss)
