This content is from: Portfolio
The Morning Brief: Fund Casualties Hit 979 in 2015
Hedge funds are feeling the fallout from last year’s lousy performance and volatility. A total of 305 funds liquidated in the fourth quarter, up from 257 in the previous quarter and 203 in the fourth quarter of 2014, according to a new report from HFR. Altogether, 979 hedge funds shut down last year, up from 864 in 2014, the highest number in one year since 2009, when 1,023 funds liquidated.
At the same time, the number of new funds declined, to 183 in the fourth quarter from 269 the previous quarter. This is the lowest quarterly launch total since 2009, according to HFR. Altogether in 2015, 968 funds were launched, down from 1,040 in 2014, the fewest in a single year since 935 funds launched in 2010.
“The hedge fund industry experienced a contraction in the number of funds in 2015, despite continued growth in investor capital to a record level, as investor risk aversion increased, resulting in capital redemptions from funds which had underperformed through the recent financial market volatility,” says Kenneth Heinz, president of HFR, in a press release. “Investors have become increasingly discriminating in their capital allocations, and the environment for launching a new fund continues to be extremely competitive.”
Starboard Value cut its stake in Four Corners Property Trust to 4.7 percent. As a result, the New York activist hedge fund no longer needs to report transactions in the stock unless the firm again meets or exceeds the 5 percent threshold. Four Corners holds real estate and restaurant assets spun off from Orlando, Florida-based Darden Restaurants.
Shares of Vivint, a solar company based in Provo, Utah, fell 4.4 percent to close at $3.46 after Credit Suisse cut its price target on the stock from $16.50 to $6. The bank points out in a note to clients that on Monday the company reported fourth-quarter results “that reinforced the uncertainty of the company’s outlook,” particularly after Vivint terminated its merger deal with struggling SunEdison last week. Vivint is now suing St. Peters, Missouri-based SunEdison for willful breach of the agreement. Credit Suisse said it cut its forecasts and target “given the difficult liquidity position and what may prove to be a lengthy rebuilding process.” At year end, Los Angeles-based Canyon Capital Advisors was Vivint’s second-largest shareholder.
Shares of Laval, Quebec-based Valeant Pharmaceuticals International fell another 11.5 percent to close at $29.69. The stock is now down nearly 90 percent from its summer high, badly hurting a number of hedge fund firms that invested heavily in it.