Deephaven Capital Management

Deephaven Capital Management
Company typePrivate
IndustryHedge funds
Founded1994 (1994)
FounderIrvin Kessler
Defunct2009 (2009)
HeadquartersMinnetonka, Minnesota, U.S.
AUMUS$4 billion (at its peak)
Websitewww.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]

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. ^ a b McGuire, Kara (January 31, 2008). "2 Deephaven hedge funds to close". Star Tribune. Retrieved October 14, 2022.
  2. ^ a b 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. ^ a b 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. ^ a b 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. ^ a b "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