Aberdeen, the new owner of institutional fund-of-hedge-funds firm Arden Asset Management, is shutting down and liquidating the Arden Alternative Strategies Fund (MUTF:ARDNX) that Arden launched nearly three-and-a-half years ago. In addition, Aberdeen has reorganized a sister fund, the Arden Alternative Strategies Fund II, into the Aberdeen Multi-Manager Alternative Strategies Fund II (MUTF:ARDWX).
When the Arden Alternative Strategies Fund originally launched in November 2012, Fidelity Investments was the fund's sole client. This proved to be a fruitful relationship as the fund grew to a peak of nearly $1.2 billion in assets in November 2014. With a strategic relationship in hand and outperformance in 2013 - beating the category by 416 basis points, with a return of +6.58% for the year - Arden launched a second fund in early 2014, the Arden Alternative Strategies Fund II, which was open to all investors.
The original fund posted returns of -0.49% in 2014 and -3.44% in 2015, while the new fund returned +1.20% from its February 3, 2014 launch through the end of that year, followed by gains of 0.07% in 2015. Through February 29, 2016, the funds had respective returns of -2.27% and -1.14%.
The Winding Down
The underperformance of the original fund, along with likely re-allocations by Fidelity, caused its assets under management to fall from its peak of nearly $1.2 billion to $852 million as of the end of February 2016. While many firms would be delighted with assets at this level, Aberdeen decided to liquidate the fund.
According to a February 24 filing with the Securities and Exchange Commission ("SEC"), the Arden Alternative Strategies Fund ceased taking money from new investors on February 29 and is expected to be fully liquidated by the end of March 2016. The fund's Board of Trustees' stated reasons for liquidating the fund were concerns over its "long-term sustainability."
As witnessed with other funds, single client risk, or client concentration, often looms large, and can result in the liquidation of a fund on a fairly short notice.
Past performance does not necessarily predict future results.
Jason Seagraves contributed to this article.