Events over the last few days have signaled what could be construed as another downturn in fortune for veteran foreign currency hedge fund and portfolio management company FX Concepts, as one of its major remaining clients gave the firm its cards.
According to currently unconfirmed sources, the client in question is believed to be the San Francisco Employees’ Retirement System (SFERS), and as a result of this particular event, information conveyed to Forex Magnates indicated that the company has begun the process of unwinding positions in order to return some of the funds to investors. One particular source explained that whilst the company may still have some smaller accounts, this was the last real institutional mandate at FX Concepts.
“With the fund’s low performance since April and a slew of key departures over the past 15 months, these factors could have represented the final straw for any remaining investors,” said Forex Magnates’ source who requested anonymity.
“I am sure they will not close down straight away,” continued our informant. “I imagine the company has a little money left to sustain it for a while longer. The position unwind is just to return the funds to investors, as I am not sure how much of its own money the company has left to manage. I don’t think there is much money left, but the key question is, what will FX Concepts do going forward?” he explained.
Robert Savage, Chief Strategist at FX Concepts spoke to Forex Magnates today and commented on the questions which were presented, saying, “We are in the process of winding down one particular client, but at this stage I cannot say which client it is.”
He continued that, “While your questions are on the right track, I cannot actually divulge more information due to client confidentiality. In a few weeks time I will be able to speak more freely.”
When asked about whether it is in fact their last institutional client, Mr. Savage added: “We still have plenty of clients, not enough to make me happy, but we still do have some. To call the company which has just left us the last institutional client is a bit of an exaggeration”.
End of a Thirty Year Era?
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The company has managed FX funds on behalf of institutional clients via offices in several international offices for approximately thirty years, however, its recent history has proven somewhat turbulent, culminating in the company’s Chairman and CEO John R. Taylor seeking to sell the $25 million apartment in New York’s Upper East Side which he purchased for $4.5 million over the asking price with funds which were provided in the form of a loan from the company, this according to media reports. Subsequent to living on the property for a mere six months, it is currently on the market.
The company entered difficult times during February this year, the same month as aggregation provider MarketFactory signed up the company for its FX aggregation feed, as two of the firm’s largest clients, the Pennsylvania Public School Employees’ Retirement System and Bayerische Versorgungskammer pension fund, both terminated their relationship with FX Concepts according to media reports at the time.
The continuing exodus of institutional capital from FX Concepts’ books has resulted in a drop in headcount, with the number of employees standing at 44 in February, compared to 60 just two years earlier.
According to Forex Magnates’ research, the company had a $20 million minimum for investment programs, some of which permitted notional or partially funded accounts, as well as large corporate and government pension funds and endowments as clients.
The company, which at one time was one of North America’s largest FX hedge funds responsible for approximately $14 billion, with a lifespan which covers two financial crises and dates back to the early 1980’s when electronic trading was something of a rarity. The company’s website has not been updated since 2007, as it displays that year alongside its copyright logo.
Mr. Savage confirmed to Forex Magnates the gravity of the contraction in the company’s business, “We saw a peak of AUM in 2007 around $14 billion and for most of this year we have been around $1 billion. Obviously, FX Concepts has been under pressure to perform as have other FX competitors.”
As America’s high-technology, world-leading institutional FX sector continues to go from strength to strength, it is an unusual circumstance that such a company would be on its uppers. Mr. Savage reflected on the company’s better days, “If we are going to get into the numbers game, I have to be very careful,” he said. “Having said that, we have been in the business for a long time and have been managing money for a long time, and are highly experienced. This year, however, has been extremely difficult”.
He concluded that, “Over the last three years we have been down, after a long period of averaging 16% – 17% return before 2010. I have a responsibility to take care of people’s money and I will do just that.”