Bailey Coates shuts operations in US

Bailey Coates, the hedge fund started by two former colleagues of TCI's Chris Hohn, has closed its US operations after suffering poor results, it emerged yesterday.

Bailey Coates, the hedge fund started by two former colleagues of TCI's Chris Hohn, has closed its US operations after suffering poor results, it emerged yesterday.

Jonathan Bailey, who founded the fund last year alongside Stephen Coates after quitting the US hedge fund Perry Group, confirmed the company no longer had any investments in the US and that the employee responsible for its US business had left.

The fund is understood to have been hit by losses in the US and by rival hedge funds short-selling its investments. It was reported the fund was struggling to survive, with large clients withdrawing funds. Assets under management are believed to have dropped from $1.3bn (£700m) to $750m over the past year. It generated returns of 20 per cent last year but is now thought to be incurring losses.

A number of hedge funds have taken heavy losses on credit downgrades of General Motors and Ford Motor in the US, and there are fears that hundreds of hedge funds will go bust. Bailey Coates has no borrowings and does not invest in credit derivatives. It expects to make a recovery this year.

Mr Bailey and Mr Coates worked with Mr Hohn at the Perry Group. TCI clashed with Deutsche Börse over its plans to buy the London Stock Exchange, with Mr Hohn demanding board resignations. Deutsche's chief executive Werner Seifert and chairman Rolf Breuer subsequently quit.