Investors are not happy with Infinity-Q, the derivatives hedge fund that had a slight ‘mismarking’ and started a wind-down.
We’ve learnt a few more things since the announcement
- The hedge fund also had a mutual fund, containing retail money.
- The appropriateness of complex exotics in a retail fund leaves some concerns, which the SEC is well aware of.
- The winding down may take a year.
- The fund managers have set aside $750m of provision to cover for litigation… That’s 37.5% of the value of the $2bn funds!
- What is really surprising, is that this money is set aside from the fund itself, not from the managers’ pocket. In other words, investors will also bear the cost of the legal fights against the fund managers and the trustees, on top of the poor performance of the strategy and the cost of its unwind. This is pretty average, to say the least.
- The Bonderman family, who seeded their ex-portfolio manager into Infinity-Q, has no influence on its winding-down. They will be treated pari-passu to other investors.
- The attorney for the portfolio manager claims there is no wrongdoing, but that was expected.
Past related article
- Navesink, February 2021: Infinity Q, the new variance swap skeleton?
- Yahoo News, September 5, 2021: What’s in your mutual fund? The collapse of Infinity Q is a warning to investors