The Blowups Continue: LMR Shuts Down Two Funds After Bets On Volatility “Backfire”

London-based LMR Partners is shutting down two hedge funds in a bid to supposedly focus more on the firm’s main funds.

One fund being shut down, the LMR Long Horizon Fund, is being liquidated after “bets on volatility backfired”, according to Bloomberg. Which, of course, reminded us of the OptionSellers.com fund blowup that took place after a natural gas short squeeze back in 2018.

The other fund being shut down, the LMR Strategic Equity Fund, was up about 3% this year. There doesn’t seem to be an explanation as to why this fund was shut down, though we guess it could be just for liquidity/deleveraging purposes. 

The LMR Long Horizon Fund was managed by James Herlihy and the LMR Strategic Equity Fund was managed by Cedric Choffat. Between the two funds, they had about $300 million under management. Both managers remain employed by the firm and help run money for the firm’s main hedge fund.

LMR’s main fund is down 20% in March, as of March 20 and the firm’s smaller LMR Alpha Rates Fund is down about 6.5% on the year. 

LMR had previously never lost money in a calendar year since starting about a decade ago and is now looking to raise more capital for its two main funds. In 119 months since its inception, it has only posted losses in 19 months. Which is easy to do when you’ve been in a Fed-rigged market that does nothing but jam higher on a daily basis every day for the last decade.

LMR is partly owned by Goldman Sach’s Petershill Fund, which has also suffered declines this year. 

Now, we’ll start to see who is worth their weight as asset managers as volatility continues to shake up the market as a result of coronavirus and its ensuing lockdowns. Anybody could provide good looking results over the last decade, likely leading to an entire industry full of “asset managers” who just grabbed on to whatever beta trade they could and collected their fees. That gravy train appears to be over.