FX Concepts to shutter investment management business

Reuters

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - FX Concepts, once the largest currency hedge fund in the world, said on Wednesday it is winding down its investment management operations given a flood of withdrawals and poor performance.

Assets at the firm "have dropped to levels that can no longer sustain the business," FX Concepts Vice Chairman Jonathan Clark said in an emailed statement.

On Monday, FX Concepts chief strategist Bob Savage said the firm's assets under management had dropped to $621 million (389.1 million pounds) from a high of $14 billion in 2007.

Clark said FX Concepts, which uses computer models for 90 percent of its trading, will wind down open positions and close all of its funds. It will, however, keep its newsletter and currency overlay businesses, which manage the foreign exchange risk of equity and bond portfolios for asset managers.

Savage told Reuters on Wednesday that the decision by FX Concept's board of directors to wind down was made late on Tuesday afternoon. He said the company will have closed all its hedge funds by the end of November.

"There isn't enough assets under management to sustain this business. In order to do the mandates that we were getting, you need at least a billion dollars," said Savage. "We need to regroup and rethink our strategy and come up with a way to re-create ourselves."

FX Concepts will also lay off an additional nine employees. The company currently has 20 employees.

Its suite of hedge funds include the FX Concepts Protection fund, with assets of $9.02 million, according to a September 26 filing with the Securities and Exchange Commission; the Global Currency Program, with assets of $28.9 million; the Multi-Strategy Fund, with assets of $68.7 million; and the Global Financial Markets Fund, with assets of $11.5 million.

In the September filing, FX Concepts reported that its assets under management were $661.2 million from 20 accounts and it had 32 employees. In two weeks, it lost at least $40 million and laid off 12 more people.

At its peak, FX Concepts had 55 to 60 employees globally.

In a conversation with Reuters on Monday and Tuesday, Savage blamed the company's woes on the underperformance of its systematic trading business.

Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut, said he was not surprised by the news.

"From an industry perspective this is another example of how the model fund community has had a hard time since the Federal Reserve introduced quantitative easing," said Bechtel.

"They (FX Concepts) are high profile because they were in the market so long. Winding down and ramping up of hedge funds happens all the time, however. They are another victim."

Savage earlier told Reuters the company was examining all options to stay afloat, including closing its flagship GCP fund, which has lost 10 percent so far this year. Its Multi-Strategy Fund has lost 8.9 percent.

Savage on Tuesday floated the idea of the company being bought by other hedge funds with no FX business, or private equity firms, noting that FX Concepts was in talks with specific entities for such a deal.

He also said the company was shuttering its London and Singapore offices.

FX Concepts was founded in 1981 by chairman and chief executive officer John Taylor, who declined to be interviewed.

The company has been besieged this year with the withdrawal of big investors, including the Pennsylvania Public School Employees' Retirement System and the Bayerische Versorgungskammer pension fund.

The last straw was the withdrawal of the San Francisco Employees' Retirement System, which voted to redeem its money from FX Concepts on September 11, CNBC reported on Monday. Savage said reports by CNBC of clients leaving the fund "are on track."

(Additional reporting by Julie Haviv; Editing by James Dalgleish)

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