Two Of Tontine's Hedge Funds Blow Up

The legends keep falling:

(Bloomberg) — Tontine Associates LLC, the
investment firm run by Jeffrey Gendell, plans to liquidate two
stock hedge funds after they lost more than two-thirds of their
value this year, people familiar with the matter said.
     Gendell gave no timetable for unwinding the funds, Tontine
Capital Partners LP and Tontine Partners LP, during a conference
call yesterday with clients, according to the people, who asked
not to be named because the information is private. Options for
raising cash include selling the funds’ investments privately or
pushing the companies in which they are the biggest shareholder
to sell themselves.
     Tontine, based in Greenwich, Connecticut, had been one of
the industry’s best performers, with its four funds returning an
average of 38 per cent annually since opening. Tontine Capital
Partners plunged 77 per cent this year through October and
Tontine Partners fell 67 per cent through September.
     “The combination of falling commodity prices, massive
anticipated hedge-fund redemptions and the seizing up of the
credit markets cause an enormous dislocation in our
portfolios,” Gendell, 49, wrote in a letter to clients last
month. The firm managed $7 billion at the end of 2007.
     Gendell, who will continue to run Tontine Financial
Partners LP and Tontine-25 funds, declined to comment.

We don’t know how long the funds in question have been around, but if you compound at 38% for, say, four years and then lose 77%, you end up with quite a bit less than you had when you started. Which is another plague that’s going around the hedge fund industry.

See Also: The Hedge Fund Business, Explained

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