Looking back on the leveling of Level Global and emerging market woes at Eton Park

February 14, 2012   Rob Copeland


AR also revisits Third Avenue strike outs.

One year ago
»» Felled by a government investigation into alleged insider trading, $3.8 billion Level Global Investors told clients that, despite notbeing charged with any wrongdoing, it would shut down rather than deal with what it expected would be significant redemption requests . "The persistent threat of capital leaving the Funds would prevent us from taking risk and investing with conviction the way we always have," wrote founder David Ganek, a veteran of SAC Capital Advisors.

Shutting down did not keep the firm out of the headlines. Co-founder Anthony Chiasson was arrested by the FBI last month in New York for allegedly trading on illegal tips related to Dell, the technology company, while he was at Level Global. Ganek was not accused of wrongdoing. Level Global's employees have since scattered; among them, William McLanahan moved to Moore Capital Management to run a four-person equity team.

See also: Big public pensions went direct to FBI-raided hedge funds

»» Eric Mindich's then-$14 billion Eton Park Capital Management considered launching an emerging markets fund to co-invest alongside its main funds. The launch happened in September, with $250 million slated for private investments in emerging markets, according to the firm's yearend letter to investors.

Little else went well in 2011 for Eton Park, which fell 11.15% for the year, declined by $2 billion in assets and watched some employees exit for other firms. Investments in emerging markets were the worst-performing positions taken by the New York firm's flagship fund last year, the letter said. "In some cases, the changed economic and political environment delayed or thwarted the catalysts behind our theses," the firm wrote of emerging markets last month. "In other cases, we were simply wrong."

Eton Park had a minor bounce back in the first month of 2012 along with the broader market, returning an estimated 2.80%, according to an investor. That compares with a 1.96% gain for the AR Multistrategy Index.

A spokesman for Eton Park declined to comment.

Five years ago
»» Third Avenue Management founder Martin Whitman conceded that his firm's focus on distressed investments was a "high-beta business" that included an elevated "strike-out rate." He said that "when we hit, we tend to hit home runs…but we strike out a lot too."

Whitman was soon to be among those sitting on the bench. In 2010, he stepped down as co-chief investment officer, but remained co-portfolio manager of the Third Avenue Value Fund. Last week he left the field. Whitman handed the bat to his co-portfolio manager Ian Lapey, who will have sole management of the fund. Whitman now serves as the firm's chairman.

Third Avenue's largest hedge fund, the $289 million Global Value Fund, is coming off a heinous 2011. It collapsed 24.87% last year, compared with a 4.70% drop for the AR Global Equity Index. The fund was up 7.56% in January 2012, according to the HedgeFund Intelligence database.

In a statement, Third Avenue's chief executive David Barse told AR: "In 2007, we did believe there would be a lower hit ratio. But, we learned some important lessons during the financial crisis and we expect our hit ratio to be higher in 2012 and beyond."

See also:
Third Avenue brings on credit expert duo
Third Avenue mulls distressed launch
Third Avenue hires Goldman associate



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