Bloomberg News

Kleinheinz, Corriente Return Client Money as Funds Close

November 30, 2012

Kleinheinz Capital Partners Inc., the Fort Worth, Texas-based hedge fund founded by John Kleinheinz, will return investors’ money as a rising number of hedge-fund managers is calling it quits.

The firm has begun winding down the fund’s positions and is 65 percent “through the process,” Kleinheinz wrote in a letter to clients today, a copy of which was obtained by Bloomberg News. Separately, Corriente Advisors LLC, a hedge-fund that handed investors a sixfold gain betting against U.S. subprime mortgages during the financial crisis, said it’s closing its main fund after poor returns.

“I am not enjoying running the fund as much as I used to,” Kleinheinz said in his letter. “Managing a fund like ours requires me to do a lot of things that make me a less effective investor.”

Firms including Brencourt Advisors LLC and Weintraub Capital Management LP have announced plans to close in the past months, as the industry struggles with subpar performance and new regulatory requirements. An estimated 424 hedge funds globally were liquidated in the first half, 14 percent more than a year earlier, according to Chicago-based Hedge Fund Research Inc. Corriente, founded by Mark Hart, told investors in a letter this month it’s closing the firm’s master fund after almost four years of “extremely poor and disappointing performance.”

Risk Assets

While the fund had annualized returns of 10 percent since inception, poor results since early 2009 are due to Hart “taking a far too bearish stance on risk assets in general and on the sovereign debt crises in Europe and the economic situation in China,” he wrote.

Hart, based in Fort Worth, Texas, blamed central bank and government intervention for reducing volatility and making macro investing more difficult. He didn’t return a call seeking comment. He said in the letter that he will continue managing European and China funds.

Kleinheinz Capital plans to return “substantially all” of investors’ money after the end of the year and the rest after an audit, the firm said. About 2 percent of the portfolio is illiquid and will take longer to give back, Kleinheinz said.

Kleinheinz Capital had $4.3 billion of assets and 24 employees as of Dec. 31, according to a regulatory filing March 29. The firm was founded in 1996. It may employ “any and all types of investment analysis and strategies, including fundamental and technical analyses,” it said in the filing. “We employ a macroeconomic approach in selecting investments.”

Mark Stupfel, who works at Kleinheinz, plans to start a firm in the second quarter of next year that will hire some of Kleinheinz’s analysts and administrators, Kleinheinz said, adding that he will be the new company’s lead investor and won’t have a management role. The new firm will be located at Kleinheinz’s office in Fort Worth.

Kleinheinz didn’t respond to a telephone call seeking comment.

To contact the reporters on this story: Kelly Bit in New York at kbit@bloomberg.net; Nathaniel Baker in New York at nbaker14@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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