The alternative investment firm and manager of multiple alternative mutual funds, Loeb King, has decided to close its doors and return capital to investors after more than 25 years of managing assets for outside investors. Loeb King is the sponsor and portfolio manager of two mutual funds, the Loeb King Alternative Strategies Fund (tickers: LKAIX, LKASX) and the Loeb King Asia Fund (tickers: LKPIX, LKPAX), both of which were launched as mutual funds within the past eighteen months.
According to an SEC filing, the Loeb King funds will be liquidated no later than February 13, 2015. In addition, Loeb King is one of multiple sub-advisors in two other mutual funds, the BlackRock Multi-Manager Alternative Strategies Fund and the Neuberger Berman Absolute Return Multi-Manager Fund.
BlackRock and Neuberger Berman Funds
In a filing with the SEC, BlackRock has indicated that the Loeb King portfolio, which is the sole event driven strategy in the fund, will be re-allocated to the other five managers in the fund or to BlackRock affiliated mutual funds, effective January 30, 2015. The BlackRock fund current has $99.8 million in assets and was launch just five months ago.
Neuberger Berman appears to not have filed yet with the SEC regarding the manager change, but the $1.6 billion fund currently employs two other event driven managers (Levin Capital Strategies and Visium) that could likely take up the assets offloaded by Loeb King.
In a phone conversation with Gideon King, Loeb King’s CEO and CIO, he noted that both BlackRock and Neuberger Berman “have the infrastructure, investment acumen and distribution strength to succeed in what will be a very competitive environment.” Indeed, as the liquid alternatives business continues to grow, each of those skill sets will become more important to manage assets across a range of alternative strategies, managers, custodians and counterparties, all the while keeping a focus on servicing clients and keeping tabs on existing managers.
The closure of Loeb King highlights one of the risks that is likely more prevalent in alternative mutual funds than their traditional counterparts, which is the risk that managers will close up shop and retire – not for nefarious reasons, but because the key principals have hit the point where they would rather focus on managing their own wealth, or move onto other interests. In the case of Loeb King, and as noted in a recent Bloomberg article, Mr. King decided that the compliance burden of managing outside money became too great and that capital can be more effectively deployed by running the assets as private capital. Hence, when investing in single manager funds, managed by smaller, boutique asset management firms, this type of event should be expected.