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Exclusive: Hedge fund Pine River loses more partners after asset decline - sources
March 16, 2017 / 7:40 PM / in 8 months

Exclusive: Hedge fund Pine River loses more partners after asset decline - sources

BOSTON/LONDON (Reuters) - Hedge-fund firm Pine River Capital Management LP is losing two more partners following a difficult year that involved a restructuring and major decline in assets, people familiar with the matter told Reuters.

Franklin Parlamis, the firm’s most senior executive on the West Coast who had been with the firm for a decade, left Pine River in late-February, said two people familiar with the matter who were not permitted to discuss the private fund’s personnel movements publicly. He is now working on his own business, Aequim Alternative Investments.

Annette Krassner, who has been Pine River’s chief administrative officer since 2012 and oversees human resources, facilities, events, administrative staff and internal communications, will leave at the end of March, the people said.

Once Krassner leaves, Pine River will have 11 partners, compared with 16 partners in 2016. The firm does plan to name new partners in the coming weeks, one source said.

Pine River established itself as an industry powerhouse after its Pine River Fixed Income Fund earned a spectacular 93 percent gain in 2009.

Losses, outflows, and a key management change that helped spark the decision to shutter some funds have left Pine River with $9.8 billion in assets, down 35 percent from the $15 billion it managed in 2015.

Management, including founder Brian Taylor, spent much of last year overhauling the business and closing seven funds, including its prominent fixed-income fund. Pine River now manages four funds.

Parlamis ran the Pine River Convertibles Fund which had $250 million at its peak in 2015, but shrank to just $100 million at the end of last year, people familiar with its performance said.

Although the fund’s performance was strong, management decided to close the fund and return remaining investors’ money because it was too small to keep going profitably. The fund gained roughly 17 percent last year and had an annualized return of roughly 11 percent since its 2009 launch.

Parlamis’s departure was amicable, both sources said.

The strategy of investing in convertible securities will still be offered through the firm’s flagship Pine River Fund and separately managed accounts, where clients’ money is managed without mixing their investments with others.

Adam Stein, a New York-based portfolio manager who worked closely with Parlamis for years and relocated to the East Coast in 2016, will be in charge of those types of investments, which convert into other types of securities under certain circumstances.

Since Taylor launched the streamlining and restructuring effort last year, Pine River has closed seven portfolios that may have been too small and unable to generate much future interest from investors.

Among them were one of its best-known offerings, the Pine River Fixed Income fund, which posted huge returns early in its eight-year life before losing money in 2015 and in early 2016.

Steve Kuhn, who ran the Pine River Fixed Income fund, left in 2016 to focus on philanthropy. He was the firm’s most public face, representing Pine River at conferences and other events.

Pine River is now concentrating on its flagship fund, as well as the Pine River Liquid Rates fund, the Pine River Liquid Mortgage fund and the Pine River China fund, whose planned spin-off has been delayed.

Taylor wrote to investors about the restructuring last summer and then crisscrossed the world to explain his thinking regarding the changes.

He also laid out ways for long-term investors who made big financial commitments to pay less in fees.

The flagship Pine River Fund returned 8 percent over the last 12 months and was up 0.9 percent in 2016 after a 2.75 percent loss in 2015. Aaron Yeary, Colin Teichholtz and James Clark manage the multi-strategy fund. The Pine River Liquid Rates Master Fund earned 17.3 percent in 2016 and 13.5 percent in 2015.

Richard Knight, a partner who had been in charge of business development left last year as well. Brendan McAllister, a partner who co-managed the fixed income fund, also left recently to focus more attention on his family.

Michael O‘Connell, who had run Pine River’s capital structure arbitrage strategy, left with his team to rival fund Paloma Partners late last year.

Reporting by Svea Herbst-Bayliss in Boston and Maiya Keidan in London; Editing by Lauren Tara LaCapra and Bernard Orr

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