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Rating:Four Years In, a Hedger Exits the Mutual Fund Biz Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, December 30, 2015

Four Years In, a Hedger Exits the Mutual Fund Biz

News summary by MFWire's editors

A hedger is shutting down his mutual fund business after four years in the '40 Act space.

On December 17 Minneapolis-based Whitebox Advisors [profile] closed its three open-end mutual funds to new investors, and it will liquidate those funds on January 19. Andrew Redleaf, founding partner and CEO of Whitebox, will reportedly refocus his team's efforts on their hedge fund business.

Andrew Redleaf
Whitebox Advisors, LLC
Chief Executive Officer
MFWire could not immediately reach Redleaf or Mike Coffey for comment on the multi-strategy, securities-agnostic firm's impending exit from the mutual fund business. Coffey joined Whitebox in April 2013 to build out and lead its mutual fund distribution efforts.

"The decision to exit the mutual fund space was a strategic one," Amara Kaiyalethe, a spokeswoman for Whitebox, tells MFWire.

Whitebox revealed the liquidation news on its website. Zero Hedge, Bloomberg, the Minneapolis Star Tribune, and the Wall Street Journal all covered the news.

"People were redeeming," Kaiyalethe tells the Star Tribune. "Because of that, the concentration risk to the investors who remained was too high for our comfort. We didn't want to get into a situation where we couldn't meet redemption requests."

Kaiyalethe declined to comment on the possibility of staffing changes at Whitebox following the impending exit.

Though Whitebox's funds have suffered this year from both rough performance and high withdrawals, this isn't Third Avenue Focused Credit all over again. Kaiyalethe reassures the WSJ that "all redemptions are being met."

Whitebox, founded by Redleaf in 2000, offers three mutual funds: the three-star, $38.7-million Whitebox Market Neutral Equity Fund, which launched in June 2004 as a hedge fund and then transformed into a mutual fund in late 2011; the $20.3-million Whitebox Tactical Advantage Fund, which launched in April 2014; and the one-star, $110.1-million Whitebox Tactical Opportunities Fund, which launched in December 2011. Jason Cross, Whitebox's long-time equity chief and a PM on all three of its mutual funds, left Whitebox two weeks ago after 14 years with the company.

The exit comes months after Whitebox gained a new backer. On August 4 Redleaf and Mark Strefling (partner, chief operating officer, and general counsel at Whitebox) sent a letter to investors revealing a "new strategic partnership" with a Neuberger Berman private equity fund, Dyal Capital Partners. Dyal specializes in passive minority investments in alternative asset managers, and in this case Dyal bought a passive, minority stake in Whitebox.

"We believe our new strategic partners will help propel our efforts to be 'best in class' in every aspect of our business as well as work with our business development personnel to help identify strategic business opportunities," Readleaf and Strefling wrote. "Whitebox retains all management authority over the business, and the Board of Managers will continue to be composed exclusively of Whitebox partners ... There will be no change to Whitebox's investment or management teams as a result of this agreement." 

Correction: A prior version of this story gave the wrong duration figure for Whitebox's time in the mutual fund business. Whitebox entered the mutual fund business four years ago, in late 2011.

Edited by: Neil Anderson, Managing Editor


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