Levitt's LG Capital Fund to Shut After Big Investor Redeemed

  • Fund's assets down to $50 million from a peak of $350 million
  • Co-founder Andrew Grossman retired from the firm in September

LG Capital Management, the hedge fund firm led by Michael Levitt that made wagers on corporate events, is returning money to clients after its largest investor redeemed holdings.

LG Capital’s main fund, which managed as much as $350 million at its peak in 2014, will return 95 percent of money to investors by March 31, Levitt said in an investor letter dated Feb. 19, a copy of which was obtained by Bloomberg. The fund gained 0.4 percent in 2015 and had fallen 3.3 percent this year through Feb. 15. Its annualized returns since inception were 10 percent.

“At $50 million it is simply not possible for us to make the required investment in the business to stay competitive and to continue to provide the standard of service you deserve and expect from LG Capital,” Levitt wrote. “By keeping the doors open, I would not be acting in the best interests of investors -- I cannot responsibly do that.”

LG Capital, which outperformed the average event-driven manager in 2015, is the latest in a series of funds that have closed amid investor angst, volatile markets and growing regulatory burdens. Doug Hirsch said late last year he was returning money to clients of Seneca Capital Investments because he was no longer able to continue making the sacrifices needed to run outside capital. In January, Nevsky Capital’s Martin Taylor told clients he was giving back money because markets driven by computers and index investing were “increasingly incompatible” with his firm’s fundamental strategy.

While LG has performed “satisfactorily,” according to Levitt, the decline in assets resulted mainly from the pullout of a big, unspecified investor.

Levitt, who was previously an analyst at Chesapeake Partners, founded LG with colleague Andrew Grossman in 2011. Grossman retired from the Owings Mills, Maryland-based firm in September, according to a filing with the U.S. Securities and Exchange Commission.

Steve Bruce, a spokesman for LG with ASC Advisors, declined to comment on the shutdown.

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