Reply #45: Sowood hedge fund collapse sparks fear, little else

[UpInArms]

http://www.reuters.com/article/bondsNews/idUSN3124622720070731?sp=true

BOSTON, July 31 (Reuters) - Hedge fund Sowood Capital's spectacular collapse this week sparked fears more funds may be on the brink, but its impact on the overall health of the industry will be small, investors and analysts said Tuesday.

The Boston-based hedge fund, which managed money for Harvard University, lost roughly half of its $3 billion in capital in less than a month, becoming the first high-profile victim of the recent credit market woes.

People who passed on Sowood when Jeff Larson launched the fund three years ago called the decline "unbelievable" and "shocking" on Tuesday, and several blamed weak risk management for the fund's death spiral.

These hedge fund investors also said the bad fortune of Sowood clients would be more personally painful than harmful for the broader $1.75 trillion hedge industry, where returns for July were flat, according to data from some industry trackers.

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"For the next month, we are not going to be out of the woods quite yet," said Charles Gradante, principal at Hennessee Group, which invests in hedge funds and tracks their returns.

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