EcoAlpha Asset Management, a hedge fund that sought to capitalize on what it touted as the looming global natural resource scarcity, closed its doors last month.
Southern Investigative Reporting Foundation readers will recall the fund from a January story that looked at the lack of disclosure surrounding the founders’ backgrounds, particularly of Win Neuger, who was the driving force behind AIG’s disastrous foray into securities lending, a gambit that required nearly $44 billion in emergency federal assistance. His actions prompted an AIG subsidiary to sue the company for its losses (a suit that was since settled with terms undisclosed).
EcoAlpha was the brainchild of Matthew Fitzmaurice who himself was at the center of a previous Wall Street mania, having spent three years as the chief investment officer and, briefly, the chief executive, of Amerindo Investment Advisors, a money management firm whose portfolio was entirely composed of the most volatile dot-com era shares. As a result, the fund’s performance resembled a Richter scale during an earthquake, swinging from a stratospheric 265 percent gain in 1999 to a loss of 65 percent in 2000. (The founders of Amerindo, Gary Tanaka and Alberto Vilar, were sentenced to prison in 2008 for stealing client capital; there was no suggestion from regulators and prosecutors that Fitzmaurice did anything wrong.)
In the email announcing the closure, EcoAlpha’s general partners said the decision was prompted by the unexpected departure of Bill Brennan, a veteran portfolio manager responsible for managing the fund’s water-oriented equities. To the Wall Street veteran’s eye, however, attributing a fund’s failure to one partner’s departure is truly unusual.
Analysts and portfolio managers regularly leave one fund for another or start their own, and while investors (more formally known as limited partners) may be concerned about departures, as long as performance is acceptable, it rarely warrants a redemption notice.
A more likely cause for EcoAlpha’s closing is much more mundane: despite its high-profile investment thesis, and after more than six months in business, the fund managed to land only one substantial investment — a $2 million investment from Columbus, Ohio’s Kelley Family Foundation. As the fund was being formed Fitzmaurice told his partners that he anticipated landing a $50 million investment from Portland, Oregon investment advisory Arnerich Messina, the primary investor in AWJ Capital Partners, a fund of funds with an emphasis on sustainability investing Fitzmaurice had founded prior to EcoAlpha.
But Arnerich Messina did not invest in EcoAlpha. Part of the reason may be that approximately 50 percent of Arnerich Messina’s capital was classified as “offshore” for tax purposes and EcoAlpha did not have an offshore investment vehicle. When the foundation called for comment, a colleague of company co-founder Anthony Arnerich took a message and said he was on vacation through mid-June.
Additionally, EcoAlpha had sought to launch with about $3.4 million in partner capital — including nearly $1 million each from Ron Blaylock, Fitzmaurice’s Georgetown University roommate, and Neuger — but for reasons that are unclear, less than $2 million of that was invested; Blaylock, according to several former EcoAlpha officials, did not participate in a second round of financing.
A call to Blaylock’s office was not returned.
With only one outside investor and just over half the agreed-upon partner capital funded, EcoAlpha cut the partner salaries 75 percent in January, according to an email that the Foundation for Financial Journalism obtained.
Fitzmaurice, reached on his cellphone on May 20, hung up when asked for comment and he did not return a follow-up call. Calls to EcoAlpha partners Jonathon Clark, Win Neuger and Elias Moosa were not returned.
Correction: A previous version of this story described Ron Blaylock as not investing in EcoAlpha. That is incorrect; he invested approximately $1 million. The Southern Investigative Reporting Foundation regrets the error.