BOSTON (Reuters) - Activist hedge fund Marcato Capital Management, backed by Blackstone Group (BX.N) and billionaire William Ackman, is shutting down as assets have shriveled after two years of poor returns, sources said on Sunday.
Richard McGuire, the firm’s founder and portfolio manager, began telling investors of his decision to return outside capital late last week, and expects to send the money back quickly because the portfolio is now largely in cash, the sources said on condition of anonymity.
McGuire had been selling positions over the last months to meet redemption requests.
A spokesman for Marcato declined to comment on Sunday.
The decision marks the end of a nine-year run for one of the hedge fund industry’s most celebrated newcomers who launched in 2010 with the backing of Blackstone Group, the world’s biggest hedge fund investor, and Ackman, his former boss at Pershing Square Capital Management. McGuire was the first former partner to leave Ackman, followed by Scott Ferguson, Roy Katzovicz and Paul Hilal, who have all set up their own firms.
McGuire over the years pressed companies ranging from DineEquity, now Dine Brands Global, which runs fast food restaurant Applebees, Bank of New York Mellon (BK.N), auction house Sotheby’s, to footwear company Deckers Outdoor Corp (DECK.N) for changes and won a fiercely contested proxy contest at Buffalo Wild Wings.
At its peak, Marcato managed roughly $3 billion in assets, but assets have now shriveled to a few hundred million, one of the sources said.
Returns tumbled late last year, leaving the fund with a sizable loss for 2018, an investor said.
