Friday, December 28, 2007

Drake Management Curtails Withdrawals From Largest Hedge Fund

By Katherine Burton

Dec. 28 (Bloomberg) -- Drake Management LLC suspended most redemptions from its largest hedge fund after losing 23.7 percent through November, according to a letter sent to investors of the New York-based firm.

Drake will meet about 25 percent of requested withdrawals from its $3 billion Global Opportunities Fund, which tries to profit from macroeconomic trends by trading bonds, stocks, currencies and commodities. The letter didn't disclose how much investors had asked to withdraw at the end of the year.

``This decision was made only after we attempted to convince redeeming investors to voluntarily rescind their redemption requests,'' said the letter, signed by Drake Management and sent out today.

The partial redemptions were made possible by an agreement with Drake's banks, the letter said. The firm's lenders would have been allowed to terminate transactions and seize collateral if net assets had fallen by 30 percent.

Drake was founded in May 2001 by Anthony Faillace, chief investment officer, and Steve Luttrell, chief operating officer, who both previously worked at New York-based BlackRock Inc. and Pacific Investment Management Co. of Newport Beach, California. The firm manages about $13 billion, including traditional bond funds.

Redemption policies for the firm's other funds are unchanged, the letter said. Faillace and Luttrell declined to comment through a spokesman.

The firm's assets more than doubled this year, after the Global Opportunities Fund advanced 41 percent in 2006. At the end of 2005, assets were $2.5 billion. This year Drake opened research offices in Miami, Sao Paulo and Istanbul.

Comparative Returns

The Global Opportunities Fund, managed by Faillace, has returned 13.4 percent a year on average since beginning trading on Nov. 30, 2002. That compares with a 13.1 percent gain by the CSFB/Tremont Global Macro Index.

Drake's $1.74 billion Absolute Return Fund, a multistrategy pool that primarily trades bonds, fell 11.5 percent this year through November. It has returned an average of 10.1 percent a year since inception on Dec. 31, 2001.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested.

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