Whitebox Advisors, a 15-year-old investment fund company in Minneapolis, next month will liquidate three poorly performing mutual funds that it started in 2012.
The three funds, under pressure by selling shareholders, amount to less than 10 percent of Whitebox’s total assets of $3.85 billion.
Whitebox operates chiefly as a private hedge fund investor that caters to affluent individual investors and institutional investors, such as pension funds.
Three years ago, it became one of the few hedge funds to try to develop products for Main Street, launching Whitebox Tactical Opportunities mutual fund with a mix of commodity futures, stocks and other securities. Chief Executive Andy Redleaf said at the time that he wanted the firm to provide investments for smaller investors.
That fund fell more than 20 percent in value this year and its assets have declined to $365 million from $1 billion since 2014. The much smaller Whitebox Market Neutral Equity fund and Whitebox Tactical Advantage fund also are down this year.
“People were redeeming” from the three funds, Whitebox spokeswoman Amara Kaiyalethe said. “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.”
The firm stopped taking orders for the funds earlier this month, she said.
Whitebox also said in a recent filing with the Securities and Exchange Commission that Jason Cross, head of equity investing, resigned from the firm after 14 years. He was succeeded by Paul Karos, who joined Whitebox in 2012 and who serves as portfolio manager of the Market Neutral Equity fund. Karos has 30-plus years of experience on Wall Street and previously worked as an analyst and equity executive at Piper Jaffray.
Whitebox, with about 100 employees in an office near Lake Calhoun, did well betting against the mortgage industry before it collapsed in 2008.
Redleaf, 57, a Yale-schooled mathematician, was one of a relative handful of investment managers who delivered huge profits to investors by, before the 2008 housing and credit crisis, shorting and hedging against stocks and portfolios of financial and mortgage companies. Redleaf had concluded many such firms were stuffed with risky mortgages that had little to no underwriting. The collapse of those assets fueled the broader economic crisis in late 2008 and 2009.