Summer is always a funny time it is the silly season for stories, as some say. It is a time of extremes when either nothing happens or life changing events occur.
Summer 2011 has been no different. The first week in August started out to be a pretty mundane. This changed dramatically after the ratings agency, Standard & Poor's, downgraded the US from a top rating of AAA on the first Friday of the month.
What ensued set the tone for the rest of the month and wasnt helped by the continuing European sovereign debt woes which continued to batter markets.
One of the casualties of the volatility last month has been New York-based 360 Global Capital which announced it is closing down (see earlier story) and liquidating its offshore and UCITS funds which have an estimated $250 million of combined assets. The UCITS fund was only launched earlier this year in April and was down only 1.29% year-to-date to July.
The fund manager has not released performance figures for August but in an email to investors it stated: Due to the historic market volatility in August and a full redemption by our largest investor, we have liquidated our investment funds and are in the process of closing 360 Global Capital.
So could 360 be the first significant blow-up in the history of the newly emerging absolute return UCITS industry? And if so what if anything does that signify?
Well, the mundane reality may be: not very much. Funds close down all the time. Most of them are for pretty mundane reasons like managers being unable to raise or sustain enough assets, fund manager departures or if they are simply underperforming.
In the past 18 months there have been a lots of funds launched under the UCITS framework. As the sector matures into its next phase, it seems inevitable therefore that in this bigger universe more funds will close - and mostly for uninteresting reasons. However, a smaller number may also close because of drastic underperformance.
What 360 has done is to highlight that the absolute return UCITS industry is going through a second phase where there will likely be more blow-ups due to a number of factors, including bad performance and also the fact that some fund managers may not understand the regulatory framework. Only time will tell how many, and which ones they will be.
For a free trial of Absolute UCITS please click here.