Hedge Fund of US Nobel Prize Winner Suffers Big Fall

Tom Burroughes

11 April 2008

Platinum Grove Asset Management, a $5.8 billion hedge fund group headed by the influential financier Myron Scholes, suffered its worst performance since inception in March, the US firm has told investors, according to Reuters. Platinum Grove, which the Nobel Prize-winning Mr Scholes founded in 2000 with other alumni from defunct hedge fund Long-Term Capital Management, suffered an 11.37 per cent drop for its domestic fund and 10.72 per cent for its offshore sister fund, according to a letter the fund sent to investors on 7 April. Meanwhile, US investment bank Lehman Brothers has bailed out five of its short-term debt funds, joining a growing list of asset managers and banks that have propped up investment vehicles, both long-only funds and hedge funds, that have been hit by the credit crunch. According to a filing with the Securities and Exchange Commission, the US financial regulator, Lehman took $1.8 billion of assets from the funds onto its books. The company recorded a $300 million loss from the bailout in the first-quarter, according to a person familiar with the writedown, said Bloomberg. Credit Suisse took a $780 million charge in February when it bought assets from its money-market funds. Legg Mason, a US investment firm, agreed last month to provide as much as $400 million to help a similar fund.