Loeb King Says It’s Closing as Hedge Fund Rules ‘Cumbersome’

Loeb King Capital Management, an investment firm with about $1 billion, is closing after principal Gideon King decided to manage his own money.

“You will just be more profitable if you run your own capital,” King, 45, said in a telephone interview. “That’s 99.9 percent of the decision.”

King informed clients in a Jan. 13 letter that the funds will begin an orderly liquidation. The decision isn’t related to the business prospects, he wrote, but because the industry has changed and there are better ways to deploy capital.

Hedge fund closures accelerated last year amid increased costs, lackluster performance and investor preference for giving money to the largest firms. A Hedge Fund Research Inc. report this month showed 661 funds shut down in the first three quarters of 2014. There are 8,362 hedge funds globally with $2.9 trillion in assets, according to the data provider.

“Controlling capital and engaging intellectually is good work if one can get it,” King wrote. “The business, on the other hand, has changed dramatically. As the endless quest for becoming institutional continues on, the soul of investing might get lost, as the unmitigated compliance processes become cumbersome and interfere with the purity of speculative contemplation.”

The Loeb Arbitrage Fund has posted a 12 percent annualized return since inception in 1988, when Thomas Kempner founded the firm. The firm’s main fund was little changed last year, King said, adding that the firm’s assets had grown in 2014.

Merger Funds

Merger-arbitrage hedge funds fell 2.4 percent last year on average, according to data compiled by Bloomberg, after more than $100 billion of potential takeovers unexpectedly blew up, including drugmaker AbbVie Inc.’s purchase of Shire Plc.

King said at least 70 percent of the firm’s assets had already been liquidated. The hedge fund’s largest holdings as of Dec. 31 were Family Dollar Stores Inc., Gentiva Health Services Inc., National Interstate Corp., Protective Life Corp., and Sigma-Aldrich Corp., according to a performance update. King said one of the firm’s largest holdings was the leveraged loans of HCA Holdings Inc.

Loeb Holding Corp., the investment business founded by Carl Loeb in 1931, owns a majority of Loeb King, according to a regulatory filing. The company has passed through four generations of Loeb family management, most recently with the appointment of James Kempner, the son of Thomas and the great grandson of Carl, as president in February 2014. Loeb Holding also owns an investment banking and a traditional money management business.

Before it's here, it's on the Bloomberg Terminal.