Lucidus has liquidated US$900m credit funds, plans to shut

[NEW YORK] Lucidus Capital Partners, a high-yield credit fund founded in 2009 by former employees of Bruce Kovner's Caxton Associates, has liquidated its entire portfolio and plans to return the US$900 million it has under management to investors next month, according to a statement Monday from the London-based company.

"The fund has exited all investments," Chief Executive Officer Christon Burrows and Chief Investment Officer Geoffrey Sherry said in the statement obtained by Bloomberg. "We would like to thank our investors and counterparties for their support over the years." A redemption notice from a significant investor in October triggered Lucidus's decision to start winding down the portfolio and shedding staff, according to a person familiar with the fund's operations, who asked not to be identified speaking about internal deliberations. Shrinking trading volume in credit- default swaps and indexes in the wake of the financial crisis posed a challenge to Lucidus, whose founders sought to profit from volatile credit markets when they started the company in 2009, the person said.

Two other high-yield funds, a US$788.5 million mutual fund run by Third Avenue Management and a US$400 million hedge fund managed by Stone Lion Capital Partners, suspended redemptions last week to avoid unloading securities at fire-sale prices, fueling jitters in the market for risky debt. The SPDR Barclays High Yield Bond ETF, a proxy for the junk-bond market, fell 2 per cent on Friday, the most in four years.

Lucidus's two main investment vehicles had been on track for their second straight losing year, declining 1.9 per cent and 4.1 per cent through November this year, according to the person familiar with the fund's operations.

An affiliate of Caxton had a minority stake in Lucidus and Asset Management Finance, an affiliate of Credit Suisse Group AG, acquired a minority stake in Lucidus in 2011.

Sherry was JPMorgan Chase & Co.'s co-head of North American credit trading before joining Caxton in 2005. Darryl Green, who co-managed the fund with Sherry until leaving in late October, was chief investment officer for Donaldson Lufkin & Jenrette's fixed-income proprietary trading group before founding Green T Asset Management Ltd in 1998, which became part of Caxton in 2002.

BLOOMBERG