Death is a common denominator. None can escape it. And while hedge funds are not themselves strictly living things, whatever the Supreme Court says, they, too, must die. Or, to use the polite and medically correct term, “liquidate.” In this way, every week is a bad week for hedge funds, one in which we bid farewell to at least a dozen old friends: The first quarter was an unusually good one in terms of hedge fund mortality, and still, 158 tearful letters were written to loved ones, a.k.a. limited partners, during 2018’s first three months.
Much like the names and faces populating the death notices of your local newspaper, should you still have one of those, the majority of those hedge funds being taken to the liquidators toiled in anonymity for their generally brief and unsuccessful lives. But sometimes the final distribution comes for the great and the good, the notable and the notorious, as well. Those not merely counted as a statistic in an HFR press release, but which warrant an obituary in Bloomberg or Reuters. And this week has been a bad week for that sort of hedge fund, especially those of the pioneering variety.
Prediction Company, 27, of Sante Fe, N.M. One of the earliest statistical arbitrage firms, Prediction was born of research into chaos theory and thrived for decades, suffering only a single losing year. It was bought by UBS in 1999 and sold by UBS, with an unwanted assist from Paul Volcker, to Millennium Management in 2013. The firm remained successful and profitable to the very end, when some other quant funds caught a cold and Millennium chief Izzy Englander decided to take it ‘round back and shoot it. Prediction is survived by its founders, physicists Doyne Farmer and Norm Packard, a group of employees looking for a new patron, and its younger but much, much larger brother, Millennium’s WorldQuant fund.
Sentient Investment Management, of San Francisco, which would have been 2 later this year. One of the first artificial intelligence hedge funds to launch, and now one of the first to die, after being unable to repeat its not-terribly-impressive 4% return of last year. Sentient, of course, would not be sentimental about its own demise: A microcosm of the hedge fund industry in miniature, it essentially gave birth to trillions of virtual traders, only to kill off those that failed to perform. It is survived by its parent, Sentient Technologies, and a handful of other AI hedge funds that hope to avoid its fate.
Tide Point Capital Management, 6, of Old Greenwich, Conn. An $800 million industrials, basic materials and consumer cyclicals specialist, Tide Point reportedly succumbed to ennui, but friends say it was looking somewhat emaciated when they last saw it. Tide Point is survived by relieved founder Christopher Winham, a Goldman Sachs, SAC Capital Advisors and Diamondback Capital veteran, and by Winham’s family who, for better or worse, are now the focus of his time.
Social Capital’s hedge fund, 2, of Palo Alto, Calif. A victim of the same disease ailing its parent company, whose symptoms include hemorrhaging talent and an unfocused, distracted leader. It is survived by its managers, Carl Anderson and Sakya Duvvuru, the former doing his lonely mourning from 6,000 miles away, where Social Capital founder Chamath Palihapitiya promised to visit but really has.
Millennium Shuts Down Pioneering Hedge Fund [Bloomberg]
AI Hedge Fund Is Said to Liquidate After Less Than Two Years [Bloomberg]
Hedge fund Tide Point shutting down after six years: sources [Reuters]
What went wrong at Social Capital [Axios]