Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

Galena Street hedge fund liquidating

Need for higher return, investor anxiety cited

James Paton, Rocky Mountain News

Published July 6, 2007 at midnight

Text size  

More Money & Markets

More stories »

The $300 million Galena Street hedge fund, run by Denver money manager Harvey Allon, is liquidating its assets in response to a flurry of withdrawal requests.

Braddock Financial, the firm behind the hedge fund, cited declines in the asset-backed securities market.

"I think investors were expecting a higher return for the risk they were taking or there was a perception that mortgage markets were too perilous a place for them right now," Allon said in a telephone interview.

In a July 2 letter to investors, the company noted that Wall Street and the media had focused on a pair of Bear Stearns hedge funds that were forced to liquidate "as a result of poor performance, margin calls and investor redemption requests."

Allon said that in Braddock's case it was a voluntary move "we thought was best for investors in the fund."

He stressed that the Galena Street fund has almost no leverage, unlike others that have run into trouble because of debt.

"There has been a lot of negative press about hedge funds invested in this segment of the securities market," Allon said Thursday. "I think investors were nervous."

He added: "We had to look seriously at the viability of continuing to operate the fund or putting it into liquidation mode."

They opted for the latter.

The Galena Street fund had $500 million in assets at its peak.

The fund had a cumulative return of 93 percent from its September 2002 inception through the end of May, but saw a 6 percent to 8 percent decline in June.

Another mortgage fund offered by Braddock has about $480 million in assets and has recorded a cumulative return of about 119 percent since its early 2003 inception, Allon said.

The firm wrote that "in the past year, in anticipation of a potential market downturn, the Galena Street fund has worked to eliminate leverage and has maintained a significant short position to hedge its long positions."

Braddock Financial said it would "manage the liquidation carefully and patiently in order to optimize the return of investor capital in as timely a manner as possible."

or 303-954-2544