Scottwood Capital Decides To Become Family Office After Majority Of Non-Related Investors Redeem

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Scottwood Capital will return almost all of its outside capital, some $470 million, at the end of the month. Then, like the founders of Soros Fund Management, Duquesne Capital Management, Shumway Capital Partners and Icahn Associates before him, Scottwood founder Edward Perlman will turn the firm into a family office. Perlman told investors last month that he planned to stop managing client capital. According to Hedge Fund Alert, he then began liquidating Greenwich, Conn.-based Scottwood's positions, leaving the firm entirely in cash by the beginning of August.

Perlman blamed increased risks in the credit markets and regulatory uncertainty for his decision. But he also seemed exasperated by the vicissitudes of investors who pulled money from the fund when it did poorly and plowed it back in when fortunes reversed. Scottwood's clients used the fund "like an ATM" in 2008 and 2009, Perlman complained, slashing its assets from almost $1 billion to less than $250 million, and then returned in droves after the hedge fund posted a 45% gain in 2009.

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