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February 01, 2017  

TPG-Axon Lets LPs Out After Sharp Loss

TPG-Axon Management didn’t invoke gate provisions for its lone hedge fund at yearend, despite heavy redemption requests.

The decision applied both to “investor-level” and “fund-level” provisions for the TPG-Axon Partners fund and an offshore companion. Under the investor-level mechanism, New York-based TPG-Axon could bar each limited partner from separately withdrawing more than 25% of its capital per three-month redemption period. The fund-level gate enabled it to limit combined withdrawals to 25% of assets.

It’s unclear how much capital investors pulled at yearend. What’s known is that TPG-Axon honored all requests, including from those who wished to redeem in full. The firm continues to manage the assets of remaining clients, contrary to rumors that it would unwind and become a family office for founder Dinakar Singh.

TPG-Axon eased both gate thresholds to 25% from 12.5% in 2010. It opted against imposing them at yearend because the fund’s holdings — mostly long/short equity positions — had grown more concentrated, and thus more volatile, than investors envisioned when they committed to the vehicle.

The recent investor exits were in response to sharp losses that totaled more than 30% in 2016. By comparison, Hedge Fund Research’s HFRI Asset Weighted Composite Index finished the year up 3.1%.

TPG-Axon’s 2016 results reflected declines in the values of stocks held by the fund and the complete write-off of a single illiquid position. It got off to a strong start this year, however, with a return of about 3% as of mid-January.

Last year’s losses and redemptions continued a series of blows for TPG-Axon. The firm lost money in both 2014 and 2015. Its assets were down to $1.6 billion on July 31, 2016, from $2.4 billion a year earlier and $11.8 billion in September 2008 — just before the financial crisis entered its worst period.

TPG-Axon’s staff has been shrinking as well. It employed 43 people a year ago, down from about 135 in September 2008. Reuters also reported in September that TPG-Axon told investors it was closing a Hong Kong office that employed 10 people and an unstaffed outpost in Tokyo. That leaves the firm with just its New York office.

Singh, TPG-Axon’s chief executive, formed the operation in 2004 with backing from private equity shop TPG. He previously was a senior partner at Goldman Sachs.