The $21 billion hedge fund BlueMountain Capital Management is closing its long-short equity fund in an effort to shift just two years after launching it, a source familiar with the situation tells Business Insider.
As a result, four equity portfolio managers were fired this week, several sources tell Business Insider.
BlueMountain recruited several money managers from other funds as it restructured its equity business in 2018, including Mahmood Reza from the billionaire Leon Cooperman’s Omega Advisors to make investments in financial companies and Sanket Patel from the Citadel alum Anand Parekh’s Alyeska Investment Group to manage energy investments.
BlueMountain put Lance Rosen, the former president and chief investment officer of Kinrose Capital, in charge of its equities strategy in July 2017 and promoted Jared Gould from senior analyst to portfolio manager in early 2018 as well.
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As of September 2017, the long-short strategy managed about $1.2 billion, according to a regulatory filing. It remains unclear how the group’s assets have changed since then.
“As a multi-strategy asset manager, we regularly expand our range of investments with new strategies that leverage our capabilities, address our clients’ needs and expectations, and adapt to changing markets,” a BlueMountain spokesman said in a statement. “Our continued focus is on the strategies in which we think we can be distinctive and have the most conviction, therefore, we have decided to discontinue our sector-based long-short equities strategy, as it is configured now. We will continue to invest in equities through a number of our other strategies, including distressed, systematic, merger arbitrage, and special situations.”
BlueMountain was launched as a credit shop in 2003 by the founders Andrew Feldstein and Stephen Siderow but has added several strategies to its offerings, including systematic equity and collateralized loan obligation arms.
The termination of the strategy and the subsequent firings are not related to the firm’s decision to double down on its earlier bet on the troubled California utility PG&E, a source close to the company tells Business Insider. It was reported earlier this month that PG&E might consider filing for bankruptcy over the billions in liabilities it faces following the deadly California wildfires.
In a December letter to investors, BlueMountain put its target price on PG&E’s stock at $59.10 a share and wrote that insured losses against the company were “overstated.” The utility’s stock opened Friday trading at $17 a share.
2018 was a very tough year for hedge funds broadly, with a surge in poor performance and a string of high-profile shutdowns. The billionaire hedge fund manager David Einhorn posted his worst year ever, and Dan Loeb’s Third Point also struggled.