The board of the F&C Event Driven fund of hedge funds has proposed liquidating the portfolio to repay investors.
The decision was prompted by investors seeking to exit the £50m fund, which has lost 17.76% so far this year and has had only five months of positive performance since its launch in June 2007.
Jason Hollands, the head of communications at F&C, says the board took the decision to comply with their obligations under the Listings Rules.
“The board already had 75% of shares so they could not meet investors’ redemption demands through a share buyback,” says Hollands. “In the challenging market we’re in they also felt they would be unable to dilute their shareholding through new investments so they took the decision to liquidate the portfolio.”
The proposition is to be voted on by shareholders at their next meeting, although the move is expected to be passed with shareholders representing 89% of the share capital indicating their intention to vote in favour of the liquidation.
Although modest in size the fund illustrates the challenges facing hedge funds and fund of hedge funds as the industry, which has suffered from challenging market conditions and punitive legislative efforts.
The ban on taking short positions in financial stocks was particularly painful for an industry that advertised itself on being able to produce positive returns regardless of the direction of markets.
According to data from Hedge Fund Research the average hedge fund has lost 17% this year marking only the second year since 1990 that they have posted a decline.