PointState Hedge Fund Has $2 Billion Estimated Withdrawals

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Zach Schreiber’s PointState Capital has suffered an estimated $2.1 billion of redemptions so far this year amid lackluster performance and as the coronavirus pandemic tears through markets.

The hedge fund also forecast nearly $640 million of withdrawals in the coming months, said a person familiar with the matter, who asked not to be identified because the details are private. It managed assets of around $5 billion at the end of last year, the person said. The outflows are estimates as of late March and could change.

A spokesperson for New York-based PointState declined to comment.

Surging withdrawals have prompted PointState to block investors from getting their cash back in full. It recently told clients that it would again be holding back some funds, following a similar warning in January.

“We acknowledge this is a historical moment of market turbulence,” the firm said in a March letter to investors seen by Bloomberg. “The substantial majority of each investors’ redemption is expected to be distributed in cash in early April. Given the volatility in global markets, we cannot, at this time, provide the exact percentage of each investors’ redemption that will be satisfied in cash.”

In January, PointState said those who withdrew their investments at the end of last year would get only 88% back in cash, while the remaining 12% would be distributed as shares in new portfolios created to hold assets with “somewhat limited liquidity.”

In the 2008 financial crisis, many hedge funds shifted hard-to-sell assets into so-called side pockets to buy time to raise cash as clients ran for the exit. These “special purpose vehicles” give money managers a chance to get the best price for assets, as opposed to dumping them in a fire sale to immediately satisfy redemption requests.

Reversal of Fortune

The outflows are the latest blow for PointState.

The macro fund has still failed to recover from losses incurred in 2018, when it dropped 19%. It lost 9.5% in the first two months of this year, with much of the decline coming in February when it fell 8%.

PointState started with about $5 billion$1 billion from legendary investor Stan Druckenmiller and $4 billion from other clients of his Duquesne Capital Management.

Initially the firm was a big moneymaker, producing double digit returns in the first three years, before its fortunes turned. Schreiber found it difficult to keep his team together. By 2018, only Josh Samuelson remained of the six partners who had left with him from Duquesne. Samuelson said in December he would be leaving the firm, too.

Schreiber tried unsuccessfully last year to raise money from investors to replace what had been lost from investments and client withdrawals, and he cut some of the 90 employees in a move to simplify the business and help generate better returns.

In contrast to PointState, macro hedge-fund peers including Brevan Howard Asset Management and Moore Capital Management have had strong starts to the year amid the market tumult.

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