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Hedge fund Vega loses big in June
Interest rate woes, redemptions spell more than $600 million in losses for Vega.
July 13, 2005: 4:04 PM EDT
By Amanda Cantrell, CNN/Money staff writer

NEW YORK (CNN/Money) - Vega Asset Management, one of the largest hedge funds in the world, told investors that its funds' assets decreased more than $600 million in the month of June because of investor redemptions and portfolio losses. The firm noted that its assets have fallen to $6.7 billion, from a peak of $10.4 billion last year.

People familiar with Vega said the firm has struggled in the current interest rate environment, with long-term interest rates failing to rise as quickly as short-term rates, a scenario Alan Greenspan has called a "conundrum."

"The current drawdowns across the Vega Funds are unprecedented in the more than eight and a half years since we launched the first fund," wrote Jonathan Berg, the chief executive of Vega Asset Management (USA) LLC, the firm's New York division, in a letter to investors.

Berg said the firm's negative performance, continued from April and May, had to do with sharp moves in the global fixed income markets during the first week of June after weaker than expected U.S. employment data as well as the firm's moves to systematically unwind positions during the rest of the month in accordance with the firm's risk management policy.

Berg wrote that the firm has made moves to streamline its portfolios and has appointed Rajiv Sobti, head trader in its New York office, to co-manage its Relative Value fund. Sobti joined Vega last year from BlackRock, where he had served as co-head of fixed income.

"Vega has taken aggressive measures to preserve capital and generate profits, including reducing risk; reallocating capital to trading teams that show consistent positive performance; and investing in our infrastructure to keep improving our business platform," read a statement from the firm. "It is important to note that Vega's commitment to our investment strategies and our strict adherence to our funds' risk limits have enabled us to successfully rebound from similar experiences in the past."

Founded in 1996 by former Citibank and Banco Santander trader Ravi Mehra, the fund follows a global macro trading strategy, in which managers seek to anticipate and profit from broad trends in the global economy. Macro managers trade stocks, bonds, currencies and equities and are known for having more portfolio volatility than those following more traditional trading strategies.

Some industry watchers have speculated that at $10.4 billion, the firm may have gotten too large, but others say the highly liquid fund is experiencing some performance difficulties at a time when investors have been quicker than usual to yank their money out of flagging funds.  Top of page


Hedge Funds
Federal Reserve
Interest Rates
Alan Greenspan
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