Scout Capital Management, the $6.7 billion hedge fund firm that is shutting April 1, said it's weighing whether to charge clients its management fee for the final quarter after investors complained.
The firm, run by James Crichton and Adam Weiss, told clients Jan. 29 that it was closing because Mr. Weiss wanted to step back from managing outside capital. Scout Capital said more than 80% of the portfolio was in cash, and the rest in easy-to-trade securities. Some clients have since objected to paying a management fee for the current quarter, given the high cash level in January and the fact that some investment staff had already left.
“While Scout's documents provide for a full management fee during this period, Scout is telling investors they are sensitive to the issue and are considering ways to address it,” said Josh Pekarsky, a Scout spokesman, who confirmed that some investors were upset about being charged the fee.
The $171.7 billion Florida State Board of Administration, Tallahassee, committed $200 million to Scout Capital Partners II in January 2013, while the $4 billion Colorado Fire & Police Pension Association, Greenwood Village, committed $30 million to the same fund one month earlier, according to Pension & Investments reports.
Mr. Crichton plans to start a new firm that manages money for clients and might team up with Scout employees. Mr. Weiss will oversee his own wealth and write a book about investing, the two managers said in January.
Their fund returned 21% last year, outperforming the 11% average gain recorded by equity hedge funds, according to data compiled by Bloomberg.
Scout, founded in 1999, will return 95% of the firm's capital by April 1, with the remainder following the completion of the funds' respective audits. Scout's main fund charges a 1.5% management fee annually.