Gandhara Is Latest Fund to Die Article

By CASSELL BRYAN-LOW Gandhara Capital, an investment firm focused on Asian and European stocks, will close down and return $2.3 billion to investors, in the latest attrition in the global hedge-fund industry. Manager Davide Erro, a 38-year-old who ran Gandhara with three partners, decided to close his doors as it became difficult to manage the divergent demands of clients. The move also came after investors had put in requests to withdraw more than a third of the fund's $2.3 billion in assets. The fund, based in Hong Kong and London, was down about 20% last year. The performance was in line with hedge funds as a group, and better than the broader stock market. Hedge funds have been closing up shop or merging with former competitors amid poor performance and an exodus of investors. Analysts at Morgan Stanley estimate that assets under management in the global hedge-fund industry will fall to less than $1 trillion by the end of 2009, from a peak of more than $1.9 trillion in mid-2008. A former trader at Goldman Sachs Group Inc., Mr. Erro was a rising star when he opened Gandhara in 2005. The firm, named to evoke a crossroads between Asia and the West, managed as much as $3.8 billion at its peak roughly a year ago. In recent months, though, Mr. Erro and his partners found themselves trying to juggle the interests of their investors. Some investors, for instance, wanted to be able to withdraw money at more regular intervals, while others didn't. Investors also were at odds over whether to cash out of the fund's small portion of hard-to-sell investments or wait in the hopes of getting a better price later. An American who also has Italian citizenship, Mr. Erro made his final decision to close several days ago and informed clients of the decision Thursday and Friday. The fund intends to return money to investors over the coming months. Mr. Erro cut his teeth at Goldman's well-regarded arbitrage desk, trading in Europe. Write to Cassell Bryan-Low at cassell.bryan-low@wsj.com