Following a brief surge of hedge fund closure announcements in late 2015 and early 2016, there had been a lull in hedge fund shutterings in recent months, as the smart money community had benefited from the dramatic jump in the S&P500 to just shy of all time highs. That changed moments ago when Reuters reported that hedge fund Pine River Capital Management is closing its Pine River Fixed Income fund and returning roughly $1.6 billion in assets to investors just two months after Steve Kuhn, one of the fund’s co-managers, left the firm.
As Reuters adds, Brian Taylor, Pine River’s founder and co-chief investment officer, told clients on Monday that the eight year old fund, which posted some of the hedge fund industry’s most eye-popping returns but lost money in 2015 and early 2016, will be closed.
“The next step in this rationalization effort will be the orderly process of converting the holdings of the Pine River Fixed Income Fund to cash and returning that cash to investors,” Taylor wrote in a letter which was seen by Reuters.
“We feel that the timing is appropriate following the recent decision by Partner and Fixed Income Fund founder Steve Kuhn to reduce his role at Pine River to focus on philanthropy.”
As a reminder, Steve Kuhn, one of the hedge fund industry’s most widely known fixed income traders, left Pine River Capital Management in April, only months after the fund he co-managed for eight years posted its first-ever loss. As Reuters reported then, Pine River Capital Management wrote to clients on Tuesday that Kuhn would soon be “completing his exit from the firm.” Kuhn told Bloomberg Television’s Stephanie Ruhle that he is leaving to focus more on philanthropy.
“I am searching for the narrow gate, trying to take a new path in life,” Kuhn told Ruhle, crediting two pastors plus friends and family for helping him reach this decision.
Kuhn was one of four managers who helped the Pine River Fixed Income Fund score some of the industry’s biggest gains. They included a 93 percent return in 2009, fueled largely by bets on the housing market. Jiayi Chen, Colin Teichholtz, and Brendan McAllister, the other managers, are staying at the fund, Pine River’s investor relations team wrote to clients in a letter seen by Reuters.
The fund was established in 2008 with a 21 percent gain and quickly helped bolster the now $14 billion firm’s reputation and assets only a few years after Brian Taylor founded it with $5 million in startup capital at his lakeside cabin in the town of Pine River, Minnesota. A 31 percent gain in 2010 followed by strong numbers every year until 2015, turned Kuhn, a Minnesota native with a degree from Harvard, into a popular speaker on the hedge fund industry conference circuit, often explaining complex trading strategies in simple language.
Last year was a rare misstep for the fund when investments in corporate junk bonds left it with a loss of 2.7 percent. Losses continued in early 2016 when it was off 4.6 percent through February. Assets have dwindled to roughly $2 billion from their peak of $4 billion.
This is not the only closure at Pine River: The Pine River Ultra Master Fund, which Kuhn managed alone, was closed this year after having lost money every year since it was launched in 2014. It never gained much traction, overseeing only $185 million in assets and losing 11 percent in the first two months of 2016.
According to the latest HSBC hedge fund performance report, Pine River was down 3.6% in 2016 after posting solid returns in the period 2012-2014, with 2012 standing out as a bumper year with a nearly 35% return.
It was unclear which bonds and holdings the fund would be liquidating in the coming months.
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