Quantitative Investment Management, Jaffray Woodriff’s $5 billion commodity hedge fund firm, is closing its two largest funds to new investments, effective March 1. The firm will also liquidate four of its smaller funds, citing poor performance and a lack of investor interest.
QIM will hard-close its $4.5 billion Quantitative Global Program and its $400 million Quantitative Tactical Program, wrote chief executive officer Jaffray Woodriff in a January 28 letter to investors. QIM wrote that while neither fund had hit capacity—the Global Program’s could handle as much as $10 billion and the Tactical Program could manage as much as to $1 billion—the firm decided it was the “prudent course of action to preemptively close both programs and only grow assets organically after March 1,” a decision QIM will re-evaluate at yearend. Only investors with existing capacity agreements will be able to get in after the close of the March 1 window.
Fundraising has not been a problem for Charlottesville, Va.-based QIM. In January 2009, the Global Program had $2.6 billion under management, but by the end of December 2009, it had raised assets to $5.1 billion from a combination of investor inflows and positive performance. The Global Program’s assets have dipped recently due to draw-downs. In January, it lost 4.33%, and since September it is down 8.28%, which brought assets to its current $4.5 billion.
“CTAs in general have struggled a great deal over the past two months and we are disappointed that we have been unable to give our clients the returns to which they have become accustomed,” Woodriff wrote in the letter. “The program’s models did a poor job of predicting market direction, losing money in all sectors.” He cited interest rate futures as one area that hurt performance.
Woodriff diffused any thoughts that the Global Program’s asset-size was responsible for its turndown: “It’s important to note that the recent drawdown in the Global Program over the last two months is within our expectations and is not a result of excessive slippage due to our asset size.” The Global Program was up in both 2008 and 2009, rising 11.94% and 11.07%, respectively. The Tactical Program 3x, which manages the bulk of that strategy’s assets, rose 40.51% in 2008 (having launched in May of that year) and 28.25% in 2009. The fund fell 6.54% in January.
Liquidations
QIM plans to liquidate its Quantitative Ultra Program and Quantitative Ultra Fund 3x, which launched in September 2007. They now manage $65 million, down from peak assets of $90 million. Those assets are from one large institutional investor, which will likely re-allocate to either the firm’s Global Program or its Tactical funds, said QIM president Michael Geismar.
While QIM specializes in short-term trading—its Global and Tactical programs typically have average holding periods of one-and-a-half weeks—the Ultra Program was designed to take advantage of longer-term price movements in the markets, and typically held positions for at least one year. Predicting long-term price movements proved to be more challenging than expected, said Geismar. “We do much better with short-term price movements than long-term,” he said. “We’ll stick with what we know best.”
The Ultra Program and Ultra Fund 3x produced only one positive year. From their September 2007 inception through December 31, 2007, they posted modest returns of 3.52% and 8.21%, respectively. In 2008, the Ultra Program dropped 6.28% while Ultra Fund 3x fell -21.19%. In 2009, the Ultra Program lost 4.56% and Ultra Fund 3x dropped 14.73%. In January, Ultra Program fell 40 basis points and Ultra Fund 3x lost 1.33%.
The firm will also liquidate its Quantitative Fund 1x and Quantitative Fund 3x, multistrategy offerings that managed combined assets of less than $10 million and invested solely in QIM’s Global Program, Tactical and Ultra funds. “What we found is most investors like to choose their own allocations,” Geismar said. The Quantitative Fund 1x gained 4.51% in 2009 and was down 2.40% in January. The Quantitative Fund 3x rose 13.34% in 2009 and was down 6.77% in January.
—Suzy Kenly