(Reuters) – London-based Denjoy Capital Partners, backed by powerful investor Blackstone Group, is shutting down its European long-short equity hedge fund following a slump in returns, a letter to investors seen by Reuters showed.
Hedge funds were hit hard in Europe last year due to poor returns and rising costs as a result of a growing regulatory burden, which has led to a record number shutting.
The Denjoy Integral Fund – which bets on both rising and falling shares – recorded overall returns of 13.9 percent since its launch in May 2011 through to the end of February, the letter to investors showed – but last year its investments lost 7.6 percent in value.
By comparison, the Eurekahedge Europe Long Short Equities Hedge Fund Index lost 0.34 percent in 2014.
The fund was launched by Frederic Denjoy, a former Brevan Howard Asset Management partner, with seed money from Blackstone Alternative Asset Management, and it reported assets of $190 million in February, another investor letter showed.
The hedge fund will return capital by the end of May.
“Whilst this decision has been a tough one to make, I made it without hesitation when I realised that the fund would struggle to deliver best-in-class returns within the current framework,” Denjoy, 37, told investors in the letter.
He declined to comment for the story.
Denjoy Capital Partners joins the likes of Bramshott Capital, Goldbridge, BlueBay and OVS Capital who have all shut down hedge funds since last year.
The firm, which focused on picking European stocks, was viewed as a potential heavy hitter in the industry because its founder came from one of the world’s biggest hedge fund firms and had won Blackstone’s seal of approval.
Considered one of the industry’s savviest investors, Blackstone has invested roughly $55 billion in hedge funds and has raised more than $2 billion for its two so-called seeding funds, which help get new fund managers started.
Competition for a piece of those assets, usually distributed in $100 million to $150 million chunks, has been fierce, fund managers familiar with the selection process have said. Blackstone has seeded fewer than 20 new hedge fund managers.
The Denjoy Integral Fund’s first year was a tough one, ending in a loss of 13.9 percent, the letter showed. Performance then picked up with a 13.4 percent gain in 2012 and a 25.25 percent gain in 2013.
In March, Leo Guo, Frederic Denjoy’s former colleague at Brevan Howard who had joined him at the launch, left the company, according to records with UK’s Financial Conduct Authority. (Editing by Simon Jessop and Pravin Char)