09/12/2012

Ex-Highbridge Trio Shutting Kingsbrook Fund

Three former Highbridge Capital traders are pulling the plug on their $100 million Kingsbrook Partners hedge fund operation.

Ari Storch, Adam Chill and Scott Wallace, who founded New York-based Kingsbrook in 2009, told investors in a Sept. 11 letter that they plan to return all outside capital by yearend — at which point they’ll focus on managing their own money.

From its inception through the end of August, the Kingsbrook Opportunities fund posted a cumulative return of 31.1%, though it was down 1% for the first eight months of this year. The vehicle invests in small- and micro-cap companies, mainly through preferred shares, convertible bonds and private investments in public equities.

In their letter to investors, Storch, Chill and Wallace cited a dearth of attractive investment opportunities. “Our belief is predicated on a number of factors that have led to a structural shift in the markets in which we invest,” they wrote. “Put

simply, we do not believe that the right risk/reward investment opportunities currently exist that will enable us to generate risk-adjusted returns . . . consistent with our objectives.”

The partners ran a similar strategy at Highbridge, where they started in 2001. At the time of their departure in early 2009, Storch was a senior portfolio manager in charge of the structured-investments group.

Highbridge, the hedge fund-management arm of J.P. Morgan, has about $17 billion of gross assets under management.

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