Chelsea Clinton's husband closes hedge fund due to poor performance

Less than two years after it launched, the Greek-focused fund in the Cayman Islands is shutting its doors

 

Rachael Revesz@RachaelRevesz
Thursday 12 May 2016 16:39
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Marc Mezvinsky, far right, in 2014, part of the Clinton family
Marc Mezvinsky, far right, in 2014, part of the Clinton family

The hedge fund business of Hillary Clinton's son in law has taken a hit with one of its funds closing its doors just two years after it failed to add value for investors.

The Eaglevale Hellenic Opportunity Offshore Fund, a pooled investment fund domiciled in the Cayman Islands, lost 90 per cent of its value after its main investment – Greek banking stocks and government debt – failed to recover.

It would have been a blow for executive Marc Mezvinsky, who married Chelsea Clinton in 2010, as he had pitched the idea for the portfolio, as reported by the New York Times.

Brought to market in July 2014, the fund aimed to be a way to bet on the recovery of the Greek economy and raised $25 million from investors.

Greece is a risky investment, with 10-year Greek government bonds yielding around 7.5 per cent - UK 10-year government bonds yield around 1.4 per cent in comparison - and bank stocks are inherently volatile.

Overall Greek stocks failed to bounce back as hoped, with the Athens Stock Exchange plummeting around 90 per cent since launch of the fund.

Having a hedge fund manager – with a failed hedge fund – in the family will do little to convince Hillary Clinton’s critics that she is not bound to Wall Street or its lobbyists. Tens of millions raised for the fund came from Clinton supporters.

Hedge funds require millions of dollars to invest in, often using a so-called 2 and 20 fee structure, where investors pay high annual fees to the manager and a 20 per cent performance fee if the manager performs well.

They are also highly opaque structures which do not always reveal what exactly they are invested in.

In 2014, Ms Clinton’s husband and his partners said they were confident that Greece would soon be on the path to “a sustainable recovery”. By the end of that year, the partners acknowledged they may have been mistaken.

Mr Mezvinksy spoke at conferences to promote the idea of “investing for growth” in Greece.

Yet the Greek banking crisis, which saw a political revolution in the country in reaction to being forced into austerity in return for a bailout from the EU, as well as a shutdown of its stock exchange to prevent massive falls in its stocks last year, has kept the fund from prospering.

The rather small size of assets in the hedge fund would have also hindered its liquidity, with its underlying investments more difficult to buy and sell.

Eaglevale Partners was founded in Manhattan by Mr Mezvinsky and two former Goldman Sachs colleagues, Bennett Grau and Mark Mallon.

The loss in value for hedge fund managers may not fare well for investors but does not hurt the firm's partners too badly – they will have a larger tax loss on investments to claim against any gains in 2017.

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