After 20 years of managing the $3 billion Seminole Capital Management Co. Inc., its co-founders have decided the time has come to step back and circle the wagons.
Michael Massner and Paul Shiverick wrote a blunt letter to their investors describing a list of troubles facing the fund. The combination of high-frequency traders, the increased popularity of passive investments like ETFs and the Feds prolonged low interest-rate policy have conspired to “change the game” of hedge fund management.
“We are not confident our model can maintain historical-like returns in the future,” without losing some extra baggage, they wrote.
The baggage that will be ejected will take the form of a $400 million return of assets to their shareholders. This is an unusual step for fund managers who are usually loathe to admit they may be standing on thin ice.
“This is a decision we have struggled with, yet we believe it is the right thing to do,” they said.