Deephaven retrenches as performance rises and assets dip


An earnings report filed recently by Knight Trading Group provides an unusual look into the financial workings of a major hedge fund, Knight affilitate Deephaven Capital Management. And it shows to what extent a loss of assets can hit a hedge fund's bottom line.

All six of Deephaven's hedge fund strategies ended 2005 with positive performance, ranging from 2.67% to 13%, which of course ensured the flow of performance fees. Aided by a strong December, some of the funds performed better in 2005 than the previous year.

But the report made by Knight in January noted that Deephaven's management-fee