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Ex-Perry Affiliate Throws In The Towel

Recon Capital's $300 million flagship Recon Fund, which was originally affiliated with Perry Capital, shut down on March 31 because of unsatisfactory performance, according to an investor letter. The fund invested in capital structure arbitrage, convertible arbitrage and distressed securities.

Recon Capital's $300 million flagship Recon Fund, which was originally affiliated with Perry Capital, shut down on March 31 because of unsatisfactory performance, according to an investor letter. The fund invested in capital structure arbitrage, convertible arbitrage and distressed securities.

In the letter, Managing Director Robert Friend blamed low volatility in interest rates, equities, emerging market debt and credit spreads for the poor performance. "Our strategies...depend more than anything on liquidity," he wrote. "Today, we are witnessing extreme low volatility readings across multiple asset classes." Friend declined to comment.

The fund launched in 2002 and at one time rented office space and received other services from Perry, but no business relationship has existed for at least a year. A Perry spokesman declined to comment.

The fund dropped 1.43% in the first quarter, on the heels of a 1.21% gain in 2005 and 8.38% decline the prior year. In 2003, it was up 41.43%. "Admittedly we have made some mistakes," Friend conceded in the letter. "The first that comes to mind is May 2004 when I became worried that the game was ending and volatility would rise." The letter did not elaborate but says there were two additional mistakes later: "failures to monetize our volatility bets in August 2004 and April 2005."

Arbitrage strategies have been doing poorly elsewhere. In December, New York-based Tiedemann Investment Group's Invictus Partners' $350 million equity statistical arbitrage fund run by Gregory van Kipnis shut down for performance reasons (AIN, 4/3).

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