08/22/2012

GeoSphere Stays Afloat With New Account

It looks like GeoSphere Capital has been thrown a lifeline.

The once-$1.4 billion equity manager appeared to be on its last legs, with just $200 million of assets remaining, when an unnamed investor this month agreed to open a $200 million separate account. The fresh capital should be enough to allow the New York firm to keep its doors open.

For weeks there had been talk that the firm, led by former SAC Capital portfolio manager Arvind Sanger, wouldn’t survive to the end of the year. GeoSphere’s assets, which reached $1.4 billion in 2008, have been shrinking ever since, forcing the firm to cut staff and close its Singapore office earlier this year.

GeoSphere, which takes a long/short approach to investing in the stocks of

industrial and natural-resource companies, currently runs about $100 million in two hedge funds and another $100 million in a separate account. The new account, which is expected to begin trading any day now, will lift assets under management to about $400 million.

The firm’s asset slide was the result of redemptions rather than poor returns. GeoSphere’s 2008 loss of 6.5% was far better than the 26.6% drop for the HFRI Equity Hedge (Total) Index. GeoSphere gained 10.3% in 2009 and 6.9% and 2010, followed by a 2.2% loss last year — compared to an 8.3% drop for the HFRI index.

About a dozen employees remain at the firm — half of its peak staffing level. Still on board are senior analyst Steve Morrissey, who also came from SAC; senior analyst Phillips Johnston, who joined earlier this year; and head trader Joe Squillace.

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