K2 closes fund as inflows peak

Melbourne-based boutique hedge fund firm K2 Asset Management has announced plans to close its Australian absolute return fund to avoid triggering potential capacity and liquidity issues that may impinge on the long-short fund’s performance.

The fund is approaching $200 million in funds under management and will close to new investors at the close of business on October 29.

K2 chief investment officer Mark Newman says the fund will continue to accept inflows from existing clients up to a “hard close” figure of $350 to $400 million in funds under management, at which point no new monies will be received.

“The liquidity is on the long and the short side, but as you get bigger the ability to cover the shorts decreases at the margin and medium sized companies become less liquid,” Newman says.

K2 is a long-short equity manager established in July 1999 by former BT executive vice-president, Campbell Neal and Newman, who is a former Hong Kong-based HSBC Asset Management director.

The group’s other fund the K2 Asia ex-Japan has US$100 million in funds under management and will also look to close, but this will be when inflows push it above US$250 million Newman says.

Both funds, which Equity Trustees acts as the responsible entity to, also have Cayman Island-registered versions which international investors can use to access both offerings.