Hedge fund LionEye to shut after losses, redemptions: sources

By Svea Herbst-Bayliss

BOSTON (Reuters) - LionEye Capital, a $1.5 billion event-driven hedge fund, is closing its doors at the end of December after suffering double digit losses and heavy redemptions this year, two people familiar with the matter said.

The six year-old fund, run by Stephen Raneri and Arthur Rosen, is the latest casualty in an industry being battered by unpredictable markets and more demanding investors who are ready to pull money out at the first whiff of trouble.

Raneri and Rosen, who previously worked at Ramius Capital, could not be reached for comment.

In the first 11 months of 2015, LionEye lost 19 percent, hurt by heavy losses at top investments including specialty retailer Men's Wearhouse , health and wellness products retailer GNC Holdings Inc and technology company Yahoo! Inc.

As the losses grew, more investors asked for their money back and that helped shrink capital from roughly $2.5 billion earlier in 2015, one of the people familiar with the matter said. Clients would receive most of their money back by year's end, one person said.

While LionEye's long term record was solid, with a 7.2 percent average annual return, there were ill-fated bets this year. During the third quarter, the firm raised its stake in restaurant operator Famous Dave's of America, leaving it as the second largest investor with 1.2 million shares. The stock has tumbled 71 percent this year.

FinAlternatives first reported that LionEye will shut down.

Funds like LionEye that specialize in exploiting pricing divergences before a corporate event such as a merger have had a tough 2015 with the average fund losing 2.3 percent, Hedge Fund Research data showed. Funds that invest in distressed securities fared worse, losing 6.4 percent through November, HFR said.

The average hedge fund is roughly flat this year, performing modestly better than the broader Standard & Poor's 500 stock index which has lost 1.76 percent since January.

Nonetheless, investors in hedge funds are said to be less willing than ever to wait for a fund that is in the red to recover. Big name firms Fortress Investment Group and Bain Capital said in October that they would shut their global macro funds while Chicago-based Achievement Asset Management said last month that it would shut down.

During the first half of 2015, the most recent data available from HFR, 417 hedge funds shut and 516 new ones started. Last year, 864 funds went out of business and 1,040 opened.

(Additional reporting by Simon Jessop in London; editing by Grant McCool)

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