November 1, 2012 / 6:06 PM / in 5 years

Hedge fund Edoma Partners to shutter

LONDON (Reuters) - Pierre Henri-Flamand, a former head of proprietary trading at Goldman Sachs, is to shut his hedge fund Edoma Partners just two years after its vaunted launch.

Flamand cited “unprecedented market conditions” for the closure of his London-based fund, which has struggled with poor performance and watched its assets under management shrink to $855 million from a peak of more than $2 billion.

“This is very disappointing for everyone concerned...we felt the most responsible course of action was to return money to investors and cease investment activity,” Henri-Flamand said in a statement.

Edoma was one of the highest profile hedge fund launches since the financial crisis, part of a wave of spin-outs from investment banks after new regulations restricted banks from gambling with their own capital.

But tough and unpredictable markets have made it difficult for funds to make money, and while a number of managers have already decided to call it quits, industry sources expect more to follow as investors begin to put in their end of year redemption orders for poorly performing funds.

“There will be more. Some managers are moving towards two, three years without performance fees,” one London-based investor in hedge funds said, asking not to be named.

Hedge funds typically charge an annual 2 percent management fee, but make the bulk of their cash from taking 20 percent of the fund’s positive performance.

Edoma, a so-called event-driven fund, was set up to make bets on corporate news events such as merger and acquisitions, bankruptices and restructurings.

The fund had fallen 4.9 percent in the first 10 months of the year, a source familiar with the fund said. This is versus a 5.3 percent gain for the average event-driven fund, Hedge Fund Research data shows, after managers profited from a recovery in corporate dealmaking.

This year has already seen several big-name managers decide to stop trading.

Greg Coffey, one of the industry’s best-known figures, told investors by letter last month that the demands of his job were colliding with his desire to spend more time with his family, three sources said at the time.

As many as 73 Asia-focused hedge funds had shut down this year to end-September, although Europe has seen fewer closures.

Editing by Leslie Gevirtz

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