The Morning Brief: After 28 Years, Perry Shutters Flagship Fund

Richard Perry, one of the longest tenured and best-known hedge fund managers, is shutting down his flagship fund amid his worst period of performance in his 28 years running New York-based Perry Capital.

“Although I continue to believe very strongly in our investments, process and team, the industry and market headwinds against us have been strong, and the timing for success in our positions too unpredictable,” Perry told clients in a letter, according to a Bloomberg report. The former Goldman Sachs risk arbitrageur racked up double-digit gains in 14 of his first 19 years without suffering a down year and at one time managed about $15 billion.

In 2008, however, Perry lost about 28 percent. It also lost more than 7 percent in 2011, 3.4 percent in 2014, 12.6 percent last year and 2.6 percent this year through July. Assets had fallen to $4 billion as of the end of August, compared with $6.4 billion at the beginning of the year and nearly $10 billion at the beginning of 2015.

Altogether, Perry qualified for Alpha’s Rich List of top-earning hedge fund managers four times. At Goldman, Perry worked on Robert Rubin’s famed risk arbitrage desk and helped make several hires who also went on to hedge fund glory, including Daniel Och of Och-Ziff Capital Management Group, Eric Mindich of New York-based Eton Park Capital Management and Thomas Steyer, founder of Farallon Capital Management (who has since retired from the firm). Christopher Hohn previously worked at Perry before leaving in 2003 to found TCI Fund Management. According to Bloomberg, Perry Capital will return most of its investors’ money next month.


The war on hedge fund fees has taken a new turn. Brevan Howard Capital Management is telling investors it will not charge a management fee for existing investors in its flagship macro fund who want to invest additional money, according to a report from Dow Jones. What’s more, the St. Helier, United Kingdom-based firm does not plan to charge a management fee on the gains generated from existing money, according to the report, citing people familiar with the matter. However, it will continue to charge its 20 percent performance fee. Brevan Howard is the latest among a growing list of hedge fund firms that have been cutting their fees, including New York-based Caxton Associates, Greenwich, Connecticut-based Tudor Investment Corp. and New York-based Och-Ziff Capital Management. Meanwhile, Preqin recently reported that the average management fee is now down to 1.57 percent while the average performance fee is 19.29 percent. What’s more, just 37 percent of all active funds charge a 2 percent management fee although 82 percent still have a 20 percent performance fee.



Meanwhile, Greenwich, Connecticut-based Tudor Investment Corp., which has suffered sizable redemptions, cut fees and laid off 15 percent of its staff, has now closed its ten-person Singapore trading desk, according to a Bloomberg report. Tudor, however, will retain its staff in Singapore that is engaged in computer-related research.


Senator Investment Group disclosed it owned nearly 923,000 shares of Comstock Resources, or 7.32 percent of the total outstanding as of September 13. The New York hedge fund firm did not own any shares of the independent energy company as of the end of June. The filing was made in a 13G, suggesting it is a passive investment.


Shares of controversial drug maker Valeant Pharmaceuticals International plunged 6.6 percent, to close at $25.89. However, there does not seem to be significant news on the company to justify this sharp price move. However, one analyst thinks Valeant may take an impairment charge of as much as 90 percent on Sprout, the maker of Addyi, the female libido pill. Valeant had shelled out $1 billion for the company, yet recent reports said that in July, for example, sales were only $696,235.


Shares of hedge fund favorite GW Pharmaceuticals surged more than 17 percent, to close at $126.06, after the drug company reported positive results for a treatment for a rare form of epilepsy. Among its largest shareholders are New York-based-Deerfield Management, which counted the stock as its third-largest among U.S. longs, and Greenwich, Connecticut-based Viking Global Investors.