Hedge fund Kleinheinz Capital to liquidate

NEW YORK Fri Nov 30, 2012 8:18pm GMT

NEW YORK Nov 30 (Reuters) - Hedge fund Kleinheinz Capital Partners, which has roughly $2 billion in assets, told investors on Friday that it is shutting down.

"After over 20 years of managing hedge fund partnerships and nearly 17 years since I started this firm, I have decided to return our investors' capital," John Kleinheinz said in a letter dated Nov. 30. A copy of the letter was obtained by Reuters.

Kleinheinz, who once described himself as a contrarian who ran the value-oriented global investment strategy, wrote that the Fort Worth, Texas-based firm had started closing out its positions and plans to pay out substantially all of its capital early in 2013.

A representative at the firm declined comment.

Over its lifetime, the fund has delivered strong returns, but recently has had a tougher time.

Kleinheinz, in the letter, said the fund managed to generate compound annual returns of over 21 percent. Last year, however, the fund lost about 25 percent, and this year returns have been flat through June, one investor who received the letter said.

Kleinheinz's decision comes at time a number of hedge fund managers have faced tough market conditions and are considering alternatives.

"My decision to return investor capital was based on the fact that I am not enjoying running the Fund as much as I used to and that managing a fund like ours requires me to do a lot of things that make me a less effective investor," he wrote.

Kleinheinz said he now plans to be the lead investor in colleague Mark Stupfel's new fund, which will launch during the second quarter of 2013.