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By Svea Herbst-Bayliss
BOSTON, March 23 Thirteen years ago Eric Mindich
set an industry record when he raised $3 billion for his new
hedge fund Eton Park. Now the fund is being shut down, becoming
the year's most prominent casualty in an increasingly tough
trading and fund raising environment.
The decision to liquidate comes after a difficult 2016 when
Eton Park lost 9 percent and its assets shrunk by $2 billion to
the current $7 billion. It was not entirely clear what
contributed to the losses; one of the fund's biggest U.S. stock
positions was Microsoft Corp, which gained 12 percent
"We have made the very difficult decision to return your
capital, from a position of relative strength," Mindich wrote to
investors in a letter seen by Reuters.
Mindich said he expects to return 40 percent of all investor
money by the end of April and promised to try and protect the
portfolio's capital as the fund liquidates.
At its peak in 2011, Eton Park oversaw $14 billion. For
hedge funds, 2016 was the worst year since the height of the
financial crisis in 2008 with more than 1,000 shutting down as
investors protested poor returns and high fees, data from Hedge
Fund Research show. Just six months ago Richard Perry, another
prominent manager, shut down Perry Capital.
Eton Park kicked off 2016 with a modest performance, neither
losing nor making money for clients. But last year's losses,
which Mindich called "disappointing," were one of several
factors that laid the groundwork for the shutdown.
"Recently, a combination of industry headwinds, a difficult
market environment and, importantly, our own disappointing 2016
results have challenged our ability to continue to maintain the
scale and scope we believe necessary to pursue our investment
program consistent with our founding principles," Mindich wrote.
"We have been unwilling to compromise on the business model
and investment program in which you invested or the way in which
we have pursued it," he added.
The decision marks a dramatic turn for Mindich, 49, once
considered one of Wall Street's top investors. At age 27, he was
named Goldman Sachs' youngest ever partner in 1994. He had no
trouble raising money when he set out to launch his own fund,
asking investors to commit at least $5 million each to secure a
spot at Eton Park.
Mindich graduated from Harvard in the same class as Paul
Hilal and William Ackman, two other prominent investors. He was
a big donor to the Democratic Party and frequent guest at the
World Economic Forum in Davos, rubbing shoulders with government
officials and central bankers.
Eton Park's managers made bets on stocks, distressed debt
and derivatives among other securities. It scored a 22 percent
gain in 2013 and gained 6 percent in 2014 and in 2015, when most
hedge funds lost money.
Last year's contraction in assets was not attributed to
investors exiting. In fact the fund pulled in new cash even as
its performance was in the red.
(Additional reporting by Lawrence Delevingne; Editing by Leslie