FCA regulated no more

Breaking: Hedge Fund Ebullio Closing Down as Commodity Investments Turn Sour

It’s been a long time coming for one of the most controversial FCA regulated hedge funds, as its investments were
Photo: Photo: Bloomberg

Finance Magnates has learned that one of the most controversial Financial Conduct Authority (FCA) regulated hedge funds, Ebullio, is going out of business after failing to meet capital adequacy and compliance requirements. After closures of some its funds and massive underperformance throughout the years, the company will be relying on its physical assets to reimburse investors.

When asked to confirm the closure by Finance Magnates, the founder and Managing Partner of Ebullio, Lars Steffensen stated: “It’s just not fun being a hedge fund manager any more”, citing a tough capital raising environment. Arguably, the hedge fund business has never been about fun.

Ebullio made headlines in March 2010 after the fund slumped 70 percent in January and another 86 percent in February that year after forced liquidations of some large positions. Part of the company’s portfolio was invested in physical mines, with a notable 25 per cent stake in a Turkish mine, formerly owned by a Russian/Turkish consortium.

After the fund attempted to sell its stake in the mine to raise equity, the deal went sour due to tense relations between Russia and Turkey in the aftermath of the downing of a Russian jet fighter plane in November.

In a letter to the investors in the funds Ebullio Invest, Ebullio Return and eFED, the Managing Partner of the company asserted that the value of the holdings of the fund is enough to repay the investors.

That said, selling a mine share physically held in Turkey at a time when commodity prices continue rapidly declining and in an environment where the country’s president Erdogan is taking an increasingly assertive authoritarian tone is going to be difficult, to say the least.

The company’s Managing Partner Lars Steffensen shared some of his trading ideas in an interview with Finance Magnates last month. The fund was relying on an end to the historic divergence between the prices of gold and platinum; platinum has traditionally been more expensive than gold, but this trend has ended in the aftermath if the global financial crisis.

Gold, platinum
Platinum has rarely traded above gold ever since the global financial crisis, Source: NetDania

With the fund’s dismal performance over the years, the official closing comes amid growing uncertainty in the commodities space. Mining companies have been rapidly laying off staff and share prices of the heavyweights in the industry have collapsed in the aftermath of rapidly declining demand from China and other emerging markets.

Mr Steffensen has stated in the letter to investors that he has been personally supporting the operations of Ebullio financially, however an international order which has frozen his assets was issued in late December.

The Managing Partner of Ebullio claims that the order has been obtained after providing false evidence to the court. Mr Steffensen denied any allegations of fraud, stating: “We have until today been regulated. I don’t know where such information could be coming from, but it’s certainly not from any of our investors.”

Anna Reitman contributed to this report.

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