CQS U.K. LLP, the London-based firm founded by Michael Hintze, plans to restrict new investments into a hedge fund that trades mortgage-backed securities once its assets under management reach $2 billion, according to a letter sent to clients.
The CQS ABS Fund, which has gained 35 percent a year on average since 2006, currently oversees $1.6 billion, according to the letter obtained by Bloomberg News. CQS said it’s instituting the so-called soft close because it wants to manage assets “carefully and thoughtfully,” the letter said.
Firms are increasingly closing funds as the hedge-fund industry rebuilds the asset base it lost after 2008 when the collapse of Lehman Brothers Holdings Inc. roiled financial markets. SAC Capital Management LLC, the Stamford, Connecticut- based company founded by Steve Cohen, told investors last month it may stop accepting money into its largest hedge fund to ensure returns remain high.
CQS spokesman Michael Rummel declined to comment on plans to restrict investments into the ABS fund. The decision was reported earlier today by the Financial Times.
CQS, which was founded by Hintze, a former Credit Suisse Group AG credit trader, instituted a soft close of its $1.35 billion directional opportunities fund last year to new investments. The firm oversees a total of $11 billion. A soft close typically means that a fund will consider accepting money from existing clients or will replace redemptions with new investments.
The ABS fund, which is run by Chief Investment Officer Alistair Lumsden, has been boosted by its trades in the U.S. mortgage market. The “opportunity set remains strong” in the markets the firm invests in, it said in the letter to clients this week.
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