Stark Investments is closing its multistrategy hedge funds due to a “meaningful reduction” in assets under management and will concentrate on managing single-strategy hedge funds, according to a Tuesday client letter obtained by Pensions & Investments.
The firm will close the fund's flagship multistrategy hedge funds, Shepherd Investments International and Shepherd Guardian Fund, as well as Stark Investments LP, Brian J. Stark and Michael A. Roth, managing partners and co-founders of the firm, wrote in the client letter.
“Despite strong performance in our multistrategy funds this year, which are up between 5% and 6% year to date, it has become apparent to us that the financial markets have changed systematically over the past few years,” Messrs. Stark and Roth said in their letter. “As a result it has become increasingly challenging for multistrategy funds to deliver to their investors the types of attractive returns with low volatility and limited downside exposure which multistrategy funds have traditionally delivered.”
Messrs. Stark and Roth did not return calls seeking comment and additional details.
Stark Investments managed $14 billion at its peak prior to 2008 but a source with knowledge of the firm who asked not to be identified said the firm's assets as of March 31 totaled $2.4 billion, of which about $1.8 billion was in the two Shepherd funds. The size of the Stark Investments LP fund could not be learned.
The source said Stark's total assets now are rumored to be less than $1 billion.
The firm's co-founders said the firm's investment team sees “opportunities to generate attractive alpha” in credit markets, noting that the recently launched Stark Mortgage Opportunities fund and the year-old Stark ABS Opportunities fund both have “performed well” and will remain open. The size of these funds could not be learned.