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Rating:A Hedger Caught Timing Mutual Funds Saw a Sweet Rebound, Then His Bets Went Sour Not Rated 4.3 Email Routing List Email & Route  Print Print
Wednesday, July 02, 2008

A Hedger Caught Timing Mutual Funds Saw a Sweet Rebound, Then His Bets Went Sour

News summary by MFWire's editors

Fund marketers and sales people who battled market timers during the late nineties and early eighties have another opportunity to explore the feeling of schadenfreude. This time, fundies can take pleasure in the pain of Thane Ritchie, proprietor of Ritchie Capital Management.

The WSJ reports that Ritchie has gated his hedge fund in an attempt to slow redemptions from shareholders, including the famed Huizengas of Florida who have a reported $10 million investment in the hedge fund. Meanwhile, the hedge fund has already shrunk to $2 billion in AUM from its peak of $4 billion in 2005.

Ritchie's fund was one of those that used market timing strategies to siphon assets from mutual funds starting in 1999 until it was stopped by Eliot Spitzer in 2003. Spitzer also accused the hedge fund of making late trades in mutual funds to bolster its returns.

In 1999, the fund earned a return of nearly 50 percent, or nearly double the gain in the S&P 500. It gained another 35 percent in 2000 and about 12 percent in 2001 and 2002.

Ultimately, Ritchie paid $40 million this year to settle the allegations brought by the NYAG. (Ritchie told the paper that is happy to have "put the matter behind us.")

Since being put out of the mutual fund market timing business, Ritchie has raised $1 billion of fresh capital and reshaped his business to concentrate on commodity and energy bets. It is those bets that have gone sour, leading to requests for redemptions, according to the paper.

With the gates in place, Ritchie Capital is reportedly allowing investors to redeem no more than 10 percent of the amount they are seeking. 

Edited by: Sean Hanna, Editor in Chief

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