Deephaven Capital Management

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Deephaven Capital Management
Company type Private
Industry Hedge funds
Founded1994 (1994)
FounderIrvin Kessler
Defunct2009 (2009)
Headquarters Minnetonka, Minnesota, U.S.
AUM US$4 billion (at its peak)
Website www.deephavenfunds.com

Deephaven Capital Management, LLC was a subsidiary of Knight Capital Group that managed various hedge funds. The company was later shutdown due to poor performance blamed on prevailing macro-economic environment. [1]

Contents

History

Deephaven Capital Management was established in 1994 with $5 million in assets by Irvin Kessler. [2] It focused on event-driven funds in addition to five additional funds managed from its offices in Minnetonka, London, and Hong Kong. [1] At its peak, the company managed $4 billion in assets in six different hedge funds. [3] Kessler sold the company in 2000 to Knight Capital Group although he continued to work there for a few more years before leaving to found Provident Advisors and later Walleye Capital. [2]

The SEC investigated Deephaven Capital in 2006, accusing one of its portfolio managers of insider trading involving 19 of its Private investment in public equity (PIPE) offerings. [4] The hedge fund agreed to pay the sum of $5.8 million in disgorgement, penalties and interests including $2.7 million paid for unlawful profit and $343,000 pre-judgment interest. [4] [5] The portfolio manager also paid $110,000 as part of the civil penalty. [5]

In late 2008, Deephaven froze its Global Multi-Strategy Fund with assets of $1.6 billion. [6] The fund lost 32% in 2008, which resulted in investors requesting to withdraw 30% of their funds. [7] Until then, the fund had yearly returns of 16%. In its 2008 filings, Deephaven reported a $5.7 million pretax quarterly loss, leading to a drastic slide of its $4 billion asset at the beginning of the year to $2.7 billion by October. [8] In 2009, Deephaven sold its assets in the Global Multi-Strategy Fund to Stark Investments for up to $44.5 million after an initial payment of $7.3 million. [9] [7] Upon the sale, Deephaven's remaining assets were sold off; the office furniture was sold for cents on the dollar to a local asset manager, Disciplined Growth Investors. [10]

References

  1. 1 2 McGuire, Kara (January 31, 2008). "2 Deephaven hedge funds to close". Star Tribune. Retrieved October 14, 2022.
  2. 1 2 Black, Sam (November 18, 2011). "Block E silent investor Kessler steps forward". www.bizjournals.com. Retrieved September 10, 2024.
  3. ↑ Strasburg, Jenny. "Deephaven Shuts Hedge Fund After Redemption Requests (Update3)". Bloomberg. Retrieved June 28, 2014.
  4. 1 2 United States Congress Senate Committee on the Judiciary (2007). Illegal Insider Trading: How Widespread is the Problem and is There Adequate Criminal Enforcement? : Hearing Before the Committee on the Judiciary, United States Senate, One Hundred Ninth Congress, Second Session, September 26, 2006. Washington, D.C.: U.S. Government Printing Office. p. 140. ISBN   978-0-16-078285-5.
  5. 1 2 Jaitly, Rajiv (February 4, 2016). Practical Operational Due Diligence on Hedge Funds: Processes, Procedures, and Case Studies. West Sussex: John Wiley & Sons. p. 502. ISBN   978-1-119-01875-9.
  6. ↑ "Deephaven Freezes Multistrategy Hedge Fund to Avoid Asset Sales". Bloomberg. October 31, 2008.
  7. 1 2 "Deephaven to Sell Flagship Fund". The New York Times . January 27, 2009.
  8. ↑ "Knight Capital's Deephaven to sell fund's assets". Reuters. January 28, 2009. Retrieved November 7, 2022.
  9. ↑ Kirchen, Rich (June 24, 2010). "Stark Investments loses president, four other partners". www.bizjournals.com. Retrieved October 14, 2022.
  10. ↑ Star Tribune, October 23, 2009 Archived January 9, 2010, at the Wayback Machine
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