Davidson Kempner is about to shut its $2bn (£1.53bn) distressed alternatives fund as a consequence of disappointing returns.
In keeping with reporting by Reuters, the hedge fund supervisor despatched a letter to traders final week stating that the fund can be shuttered as a result of robust investing panorama.
The Davidson Kempner Distressed Alternatives Fund was up by 5 per cent within the yr to this point, however the letter mentioned that these returns weren’t excessive sufficient. The fund supervisor added that no present investor has misplaced cash within the fund to this point.
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The fund has been energetic for greater than 12 years, and Davidson Kempner famous that at first the fund was energetic, with loads of liquidity and alternatives to restructure.
Nevertheless, the agency has determined that there are actually extra alternatives within the credit score market, for instance in company bonds or structured offers.
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“A protracted interval of rates of interest close to zero and the weakening of covenants and lender protections following the worldwide monetary disaster contributed to a big decline in company default charges, bankruptcies and restructurings; this led to a declining alternative set in liquid public market restructurings,” mentioned the letter.
Davidson Kempner added that it’s going to nonetheless spend money on distressed belongings however believes they’d be higher suited within the hedge fund’s closed-end fund and as a part of its multi-strategy funds, quite than its distressed alternatives fund.
Learn extra: Davidson Kempner companions with Alta Different Investments