Credit Renaissance suspends NAV on flagship hedge fund

Credit Renaissance Partners LLC, the New York-based hedge fund firm established in 2000 by alumni of Schroder & Co Inc and Drexel Burnham Lambert, has suspended redemptions on its flagship Credit Renaissance Fund Ltd “in the best interests of all of the shareholders”.

The suspension, announced yesterday, will last to June 30 next year.

A spokeswoman for the New York-based firm, said by telephone no-one was available at the firm to comment on the decision, and declined to say when any further comment would be possible.

Figures from Eurekahedge published in Hedge Funds Review suggest Credit Renaissance Ltd was down 15.03% in the 12 months to 31 May, and 7.53% lower over three months.

The average distressed debt fund is down 7.78% over 12 months and 2.13% over three months, according to Eurekahedge.

The data provider showed the fund was 35.19% below its high water mark, the point at which hedge funds can traditionally recommence collecting their performance fee.

Credit Renaissance’s website says the firm “invest[s] in undervalued assets with downside protection through global distressed debt, including stressed mortgage and asset-backed securities.”

Its founders – Steve Gallen Edersheim and Julian Schroeder – were high flyers in the industry as they launched the firm in 2000.

Philip Schockling, who joined in 2009 and is portfolio manager for the structured products strategy, brought with him seven years’ experience from Millennium Partners LP, where he ran a $100m portfolio and co-managed a $500m portfolio of distressed ABS, MBS and derivatives.

The firm’s process is bottom-up, with a “skeptical approach to markets and a contrarian scrutiny of ‘out of favor’ commercial sectors and corporations”.
Distressed debt and, indeed, asset-backed securities can be illiquid markets, and it is not clear if the fund already had a time-lock on it for such eventuality.

Suspending redemptions became a prevalent practice among hedge funds – angering locked-in investors – at the height of the 2008/2009 credit crunch, when up to one third of all funds curbed redemptions, according to analysis back then by Credit Suisse.

But since then it has become less prevalent, and generally frowned upon by hedge fund investors, who have often moved to Ucits hedge funds with better liquidity.

A search of the Irish Stock Exchange website – where Credit Renaissance posted its announcement – shows just a handful of NAV suspensions this year. It also shows a Ucits brand does not necessarily protect investors from suspensions of dealings and calculation of NAV.

On 10 May, for instance, the Russian Phoenix Ucits fund announced the fund’s directors had decided to suspend dealings from 4 May, as the directors had “resolved to terminate the fund”.


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