One of this year's worst-performing hedge funds has axed its manager after big losses and a breach of internal rules, as the industry struggles to reproduce last year's bumper returns in volatile markets.
The Switzerland-based investment firm, SwissDirekt, said it took chief trader Willem Van der Vorm off its High Risk fund at the end of April after the portfolio, which made money last year but plummeted by 82 per cent in 2008, lost about 9 per cent in the first four months of this year.
In dollar terms, the fund was ranked in the bottom 2 per cent of 3,658 hedge funds tracked by Thomson Reuters' Lipper during the period. After large-scale redemptions during the credit crisis, hedge funds are slowly seeing clients return but are struggling to live up to their reputation as all-weather portfolios in current market volatility.
Having made about 20 per cent last year, according to several indices, the average fund is down 0.59 per cent so far this year, according to Hedge Fund Research's HFRX index.
SwissDirekt's chief executive, Thomas Kuhn, said Mr Van der Vorm had breached internal guidelines in areas such as maximum loss per day and how long to hold losing positions. Mr Van der Vorm, a contracted employee who is no longer with the company, could not be reached for comment.
"Performance, of course, is the trigger," said Mr Kuhn. "But [Mr Van der Vorm] had a trading approach that was against the company's ideas of how the fund has to be traded. We had strict guidelines and he overruled them three times. It was a lack of discipline."
The recent losses are some way away from Mr Van der Vorm's performance before the credit crisis. In 2004, he turned a 481 per cent profit from his trading account. The situation has echoes of Gartmore's problems this year. The British company stomached a hefty hit to its shares after suspending its star manager Guillaume Rambourg.
The High Risk fund, which trades stock index and interest rate futures, has shrunk from €1.8m at its peak to €400,000, Mr Kuhn said. SwissDirekt has about €3m to €4m euros in assets. It has appointed as replacement managers Francis Everington, a former trader who has built his own computer trading systems, and Jerry Slager, a former trader on the London International Financial Futures and Options Exchange.Reuse content