June 9, 2009
Last year, amid turmoil, Deutsche Bank closed its fund Topiary. The fund, with US $1.3 billion, was the sister fund of Deutsche Banks Global Masters Fund. According to Financial News the decision was made in February to shutter another Deutsche Fund, Global Masters.
The liquidation of Global Masters has reportedly been delayed by a redemption gate imposed by one of its portfolio funds. This type of gate has become extremely common as managers weigh the needs of the redeeming investor versus the needs of the investors who choose to stay, both groups need to receive the same fiduciary treatment. In addition many other factors come in to play, such as cash on hand, costs of closing and of course the losses incurred when selling into a weak market.
The German bank is finalizing plans to shut its Global Masters fund of hedge funds following a brutal 2008 and major redemptions. The fund which once managed almost US $10 billion, had fallen to just US $2 billion in assets. The fund fell, as investors fled, following an 18% drop in the previous year.
The fleeing of the fund of funds investor has become the unfortunate downfall of many hedge funds. It is also the beginning of the end of the fund of fund business. This type of investor seems to have the fatal and distinct inability to understand that as they extinguish all leverage with one hand and then redeem all funds with another, they are making reactionary decisions that will lead not only to their own losses, but also to their own extinction.