Hedge Funds Kite Lake and Astaris Prepare to Close to New Cash

(Bloomberg) -- Two hedge funds in London are preparing to close to new cash even as the broader industry bleeds tens of billions of dollars in capital.

Kite Lake Capital Management will stop taking money in its flagship $1.4 billion KL Special Opportunities Fund on Oct 1, according to an investor letter and a person familiar with the matter. Martin Beck’s $650 million Astaris Special Situations Master Fund, which contains money from investors including Blackstone Inc., is also preparing to close to new cash once assets reach €1 billion ($1.1 billion), another person said.

Representatives for Kite Lake and Astaris declined to comment.

The moves highlight the mixed fortunes hedge funds are facing. While some, including the major multistrategy hedge funds, have grown so big that they are limiting the amount of money they take in, the majority are facing a crunch.

Investors pulled a net $216 billion between 2022 and 2023 and withdrew another $39 billion this year through May, according to data compiled by eVestment. 

The exodus has contributed to more than 1,000 hedge funds closing since the start of 2022 and discouraging startups. More funds have shuttered than started during the period, according to data compiled by Hedge Fund Research Inc.

Hedge funds often close to new money because of fears that running too much cash will reduce their agility and harm returns.  

Started in 2011, Kite Lake reopened to new cash on Dec. 1 in its main fund and manages about $2 billion firm-wide. It has had positive annual returns since then and was up 6.9% through July, according to the letter. 

The firm has recently hired former Goldman Sachs Group Inc. executive Ram Krishnan as its head of credit trading and origination. 

Beck, a former senior analyst at Centerbridge Partners Europe, started his hedge fund in 2020 with $85 million to bet on and against companies in distress. He now manages about $750 million, including a closed-end fund with initial backing coming from Blackstone. 

The Astaris Special Situations fund was up 9.3% through July, while the Capital Partners Fund I gained 19.5%, according to investor letters seen by Bloomberg. 

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