Energy Bets Help Take Down Hedge Fund
November 17 2015 - 3:50PM
Dow Jones News
One of Chicago's biggest hedge funds is shutting down, victim of
a brutal pullback for energy bonds pummeling Wall Street investors
and international oil companies alike.
The roughly $900 million hedge fund at Achievement Asset
Management, run by former UBS Group AG executive Joseph Scoby, was
down about 7% through the end of October. Mr. Scoby said he opted
to hand back the remaining cash rather than "run a laboratory with
investors' money."
"Obviously, we did not make money in credit," Mr. Scoby said.
"The thing you zero is on is the crowded nature of this
market."
Achievement, which had more than $2 billion under management in
mid-2014, is the largest hedge-fund casualty to date from the
reversal of a trade that was supposed to carry the year for many
star investors. Many managers spotted an opportunity over the past
year in beaten-down debt from energy companies hit hard by oil's
slide. Yet crude continued to fall, leaving Wall Street traders in
the red and large oil companies reporting multibillion losses.
U.S. oil prices fell to near $40 a barrel Tuesday, partly on
concerns about the continuing oversupply of crude. The sudden end
for Achievement is among the first energy-related hedge fund
closures, though industry executives expect more in the weeks to
come.
Mr. Scoby, 50 years old, started his career at Chicago
option-trading firm O'Connor & Associates, later bought by a
predecessor to UBS. Mr. Scoby later served as the group's chief
risk officer.
Several former O'Connor traders formed Peak6 Investments in
1997. The Achievement Fund was a part of that firm until last
September, when Mr. Scoby spun it out.
Beyond energy, the fund's losses this year included relatively
low-rated technology, media and telecommunications corporate bond
positions. Over its three-year life, the fund's performance was
roughly flat overall.
Crain's Chicago Business earlier reported the fund's plans to
close.
Mr. Scoby cited a decline in the availability of liquidity, or
the ability to trade in and out of positions, from Wall Street
broker-dealers as a reason for the disappointing run.
Post-financial crisis regulations have encouraged a shrinking of
investment bank trading desks, which many traders have blamed for
exacerbating swings in even relatively commonly-traded
securities.
"It's going to take me some time to figure out" how to navigate
the new status quo, Mr. Scoby said.
The Achievement hedge fund plans to return at least half of its
money before the end of the month, and be left with de minimis
holdings by the first quarter, Mr. Scoby said. The firm will
continue to operate a $70 million portfolio of so-called liquid
alternatives aimed at less wealthy investors, including clients of
BlackRock Inc.
Write to Rob Copeland at rob.copeland@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 17, 2015 15:35 ET (20:35 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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