Hedge fund cites market conditions for closure

February, 2016 Print

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The $1.5 billion Nevsky Capital hedge fund, which had a successful 21-year track record, has cited various factors, including difficult market conditions, for its recent closure.

In a letter to investors, the fund’s founder, Martin Taylor, said its approach of combining top-down forecasting of key macro-economic variables with bottom-up company analysis relied on a number of underlying criteria to be met. These include transparent and accurate macro and company data, logical decision-making by macro-economic policy markets, the ability to understand the positioning of other market participants and manageable fat tail risks.

However, Taylor said that global trends have turned against these criteria. In particular, he cited an erosion of data quality, such as the lack of accurate and reliable macro-economic statistics from China and India, which are becoming increasingly important to the global economy. At a company level, he said companies seek to disclose less since the global financial crisis, in order to minimise exposure to regulatory sanctions. Taylor said it is also hard to follow the logic of nationalist leaders in some countries and that event risk has risen, with algorithmic trading and thin volumes making markets more volatile.

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