U.S. fund that lost most of its value shuts doors to new investment

From Reuters - February 8, 2018

NEW YORK (Reuters) - A U.S. mutual fund that relied heavily on a strategy that profits from calm markets has shut its doors to new investment after losing more than four-fifths of its value in recent market turmoil, filings showed on Thursday.

The once-$800 million LJM Preservation and Growth Fund lost more than 80 percent in the week ended February 7, according to Morningstar Inc, after a surprise spike in market turbulence swiped investment strategies premised on low volatility.

A spokesman for the fund, which is run by a unit of Chicago-based LJM Partners Inc, was not immediately reached for comment after normal business hours.

The fund made extensive use of options, touting its ability to deliver solid returns while maintaining risk parameters in its most recent annual report to shareholders, while another document says the fund used techniques to mitigate losses in extreme market drops.

The report described the funds strategy as aiming to capture the spread between implied and realized volatility, a description that lines up with one of the hottest trades in financial markets over the last few years but that has blown up for a number of investors in recent days.

LJM Preservation and Growth Fund had been run by Anthony Caine, a veteran of the 1990s technology boom who later founded LJM, and Anish Parvataneni, a former trader for well-known investor Ken Griffins Citadel.


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