London Hedge Fund Nevsky Capital to Shut

London hedge-fund firm Nevsky Capital plans to shut down and return cash to investors, the latest closure in a struggling industry.

After two lackluster years, Nevsky's flagship $1.5 billion equities fund is "unsuited to current market conditions" because of the growing influence of computer-driven trades from algorithmic and index funds, the firm said in a statement.

Nevsky, which is headed by Chief Investment Officer Martin Taylor and co-manager Nick Barnes, is also increasingly concerned that market conditions "may continue to be more difficult for a considerable period of time," the firm said. It cited the risk that U.S. interest rates rise faster than expected and of an economic slowdown in China.

The firm, which is based behind the Royal Academy of Arts in London's expensive Mayfair district, is one of many hedge funds struggling to navigate markets dominated by the actions of hard-to-predict central banks. Plus, a lack of liquidity and the increasing prevalence of computer-driven hedge funds can cause big swings in prices of some securities.

Hedge funds on average lost 3.5% last year, according to early data from Hedge Fund Research, their second year of losses in five years. In the first nine months of last year 674 hedge funds were liquidated, compared with 864 for the whole of 2014, according to HFR. Among prominent closures in recent months has been fund of hedge funds firm Liongate Capital and Fortress Investment Group's flagship macro fund, while Mike Platt's BlueCrest Capital said last month it would return outside investors' money.

While the fundamental goal of hedge funds is to perform decently in good times and bad, recent bearish markets have taken a severe toll on many funds —a product of their reluctance to place outright negative bets.

A person close to Nevsky said the firm steered away from an overall bet on falling prices because of the risks that "wild card" events such as China adopting quantitative easing or a final spike in stocks led by the technology sector would "prove very painful for anyone who was short."

The Nevsky fund had earned an average of 18.4% a year since its launch in September 2000. It lost 1.4% in 2014 and was up 0.9% in the first 11 months of last year, the person close to Nevsky said.

Write to Laurence Fletcher at [e-mail]

(END) Dow Jones Newswires

January 05, 2016 12:05 ET (17:05 GMT)

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