When is a fund closing not a closing? When a hedge fund secretly continues to take in money from investors of its choosing. “Closing funds are the greatest marketing gimmick,” says an unnamed hedge fund manager attending Hedgestock, the Albourne Partners-sponsored event in England ending today. “It’s a way to justify fees.” But also it’s a ploy hedgies use to quietly gather assets from the likes of pensions funds, which are more likely to stick with them through thick and thin. Of course, there are other good reasons for closing a fund to investors. As one panelist at Hedgestock said, too much money can dilute returns, especially when there are limited investment opportunities, and some niche strategies just don’t have enough good opportunities in the first place. Then again, the fewer the players, the better the returns. Regarding the “too much money” theory, look at convertible arbitrage. It’s up this year, because a goodly number of investors stung by losses in the past couple years have made a beeline for the door. Incidentally, Chet Hollister of Japonica Partners, reporting from Hedgestock, said mysteriously that the first day “featured a lot of polo, some cricket, and one secret golden goose.”
