Skip to main content

Activist hedge fund Marcato Capital to shut down after drop in assets

BOSTON (Reuters) – Activist hedge fund Marcato Capital Management, backed by Blackstone Group and billionaire William Ackman, is shutting down as assets have shriveled after two years of poor returns, sources said on Sunday.

Richard McGuire, the firm’s founder and portfolio manager, began telling investors of his decision to return outside capital late last week, and expects to send the money back quickly because the portfolio is now largely in cash, the sources said on condition of anonymity.

McGuire had been selling positions over the last months to meet redemption requests.

A spokesman for Marcato declined to comment on Sunday.

The decision marks the end of a nine-year run for one of the hedge fund industry’s most celebrated newcomers who launched in 2010 with the backing of Blackstone Group, the world’s biggest hedge fund investor, and Ackman, his former boss at Pershing Square Capital Management. McGuire was the first former partner to leave Ackman, followed by Scott Ferguson, Roy Katzovicz and Paul Hilal, who have all set up their own firms.

McGuire over the years pressed companies ranging from DineEquity, now Dine Brands Global, which runs fast food restaurant Applebees, Bank of New York Mellon, auction house Sotheby’s, to footwear company Deckers Outdoor Corp for changes and won a fiercely contested proxy contest at Buffalo Wild Wings.

At its peak, Marcato managed roughly $3 billion in assets, but assets have now shriveled to a few hundred million, one of the sources said.

Returns tumbled late last year, leaving the fund with a sizable loss for 2018, an investor said. This year, while strong at the start, will also end in the red after some of the firm’s investments that are vulnerable to the effects of the U.S.-China trade war, like Terex Corp, took a hit.

From its launch through September 2018, Marcato International returned an average 10.7% a year, roughly double the 5.5% gain posted by its HFRI Event Driven: Special Situations Index.

Shrinking assets, while uncomfortable for all investors, are especially problematic for activist investors that push management to make changes ranging from buying back shares to selling off divisions to refreshing their boards.

An activist fund’s agreements with target companies often include pledges to keep a certain amount of money in the stock, something that can become difficult when clients demand their money back from the activist fund.

McGuire expects to keep managing his own capital and could in the future partner with others on investments, one of the sources said.

Raising new capital for activist funds has been tough since late 2015 when investors began worrying more about the prospects of a recession when long-biased activist funds often fare poorly. This year has been a winner for many activist funds as strong gains in the markets, specifically in the software and consumer sectors, have buoyed many portfolios including Ackman’s Pershing Square Capital Management, which has gained more than 50% this year.

But hundreds of hedge funds have also shuttered their doors this year. Hedge Fund Research reported that 540 funds shut in the first three quarters of 2019, while only 391 funds have launched during that time. In 2018, a total of 659 funds shut down, according to HFR data.

Source: Read Full Article


Popular posts from this blog

Fears coronavirus will spark divorce surge as couples self-isolate for months

Coronavirus is "very likely" to lead to an increase in marriage break-ups because of people being confined together for long periods in self-isolation, a leading divorce lawyer has said.Baroness Shackleton of Belgravia, whose previous clients have included Sir Paul McCartney, the Prince of Wales, Madonna and Liam Gallagher, revealed the view of the profession as a growing number of households go into voluntary lockdown in a bid to curb the spread of infection.Official health advice states that if one person in a property has a persistent cough or fever, everyone living there should stay at home for 14 days.Nicknamed the "Steel Magnolia" for her skills and charm, Lady Shackleton told peers at Westminster: "The prediction amongst divorce lawyers is that following self-imposed confinement it is very likely that the divorce rate will rise."Our peak times are after long exposure during the summer holidays and over Christmas."One only has to imagine what i…

At Least 23 People Dead in Australia Bushfires As Blazes Continue Raging

SYDNEY (AP) — A father and son who were battling flames for two days are the latest victims of the worst wildfire season in Australian history, and the path of destruction widened in at least three states Saturday due to strong winds and high temperatures.The death toll in the wildfire crisis is now up to 23 people, Prime Minister Scott Morrison said after calling up about 3,000 reservists to battle the escalating fires, which are expected to be particularly fierce throughout the weekend.“We are facing another extremely difficult next 24 hours,” Morrison said at a televised news conference. “In recent times, particularly over the course of the balance of this week, we have seen this disaster escalate to an entirely new level.”Dick Lang, a 78-year-old acclaimed bush pilot and outback safari operator, and his 43-year-old son, Clayton, were identified by Australian authorities after their bodies were found Saturday on a highway on Kangaroo Island. Their family said their losses left them…

Thousands of dangerous drivers with dozens of penalty points still on the road due to bizarre legal loophole – The Sun

RECKLESS drivers with dozens of penalty points still on the road due to a bizarre legal loophole.More than 10,000 Brits still hold their licence despite amassing 12 or more points on their licence.Shockingly, one man has avoided a ban after collecting 66 penalty points, as have another two motorists with 60 points.Drivers who amass 12 or more points on their licence typically are given a lengthy road ban, as well as hefty fines.But some drivers are exploiting the system and escaping punishment by successfully arguing in court that it would cause them "exceptional hardship", such as losing their job.Judges base exceptional hardship on a case-by-case basis, but drivers can dodge a ban by proving it would adversely impact someone who relies on their vehicle.Other motorists are able to continue driving despite accumulating several speeding convictions by simply ignoring their disqualification notice or re-offending after serving a ban.Figures obtained by the Daily Mail reveal me…