KKR Liquidates Equity Hedge Fund Led by Ex-Goldman’s Howard

Jun 02, 2014 10:25 am ET

(Updates with Flamand joining GLG in 10th paragraph and KKR credit fund in 12th.)

June 2 (Bloomberg) -- KKR & Co. is shutting its equity hedge fund, about three years after hiring former Goldman Sachs Group Inc. proprietary trader Bob Howard to run it.

“We have decided to close KKR Equity Strategies and return capital to investors,” New York-based KKR said in an e-mailed statement. “We would like to thank Bob Howard and the team for their dedication to the firm and exceptional professionalism in serving our clients.”

The $510 million KKR Equities Strategies fund, which was started in August 2011, was liquidated last week, according to a person with knowledge of the matter who asked not to be identified because the information is private. The fund had less than 20 outside clients who had $337 million invested, money that will be returned starting this month, the person said.

Howard is the latest former proprietary trader to leave an investment bank and join the $2.7 trillion hedge-fund industry, only to struggle with making money and attracting assets. Pierre-Henri Flamand, who ran Goldman Sachs’s global proprietary-trading unit before setting out on his own, shut his hedge-fund firm in 2012 after two years because of losses and as assets dwindled.

Howard’s fund gained about 15 percent since inception, the person said. That compares with a 7.1 percent return from equity hedge funds in the same period, according to data compiled by Bloomberg.

Goldman Alumni

The dozen employees who made up the KKR Equity Strategies team were notified of the decision to shutter the fund on May 30, the person said. Most of them worked with Howard at Goldman Sachs, where he ran the U.S. desk of its principal strategies group.

Howard joined KKR in 2010 to start its first hedge fund. KKR gave Howard, a partner at the firm, $100 million to start the fund, according to marketing documents.

Arvind Raghunathan, 50, the former head of Deutsche Bank AG’s global arbitrage business who left with his team in 2009 to start Roc Capital Management LP, shuttered that hedge fund last year after losing money.

Portman Square Capital LLP, founded by ex-Citigroup Inc. proprietary-trading unit head Sutesh Sharma, 51, last year opened with about $100 million, less than a fifth of the amount originally sought. CEO Andy Mack resigned this year and the firm is reducing operations.

Flamand closed his Edoma Partners LLC in November 2012, a little more than two-and-a-half years after starting the hedge- fund firm. Man Group Plc said last month that Flamand will join the company as a senior money manager.

KKR Prisma

KKR said it will be focusing on KKR Prisma, a unit that has invested more than $10 billion in hedge funds, and the building of strategic stakes and backing of the firms. Last year KKR agreed to buy a 24.9 percent stake in Nephila Capital Ltd., a Bermuda-based firm that makes reinsurance-related investments.

KKR said it will also concentrate on its credit hedge funds that have about $800 million in assets. The firm last year bought Avoca Capital to expand its European credit business.

Buyout firms including Blackstone Group LP and Carlyle Group LP have built hedge fund investment units to diversify beyond private equity. Blackstone has grown its hedge fund investing unit, Blackstone Alternative Asset Management, into the world’s largest with $58 billion, according to its website.