Prophet Capital to dissolve hedge fund amid ‘extreme volatility’

BOSTON (Reuters) – Prophet Capital Asset Management LP, an investor in loans and structured credit securities hit by recent market turmoil, plans to temporarily block withdrawals from one of its hedge funds and ultimately dissolve it, according to a letter sent to investors on Monday seen by Reuters.

“As you are no doubt aware, financial markets are experiencing extreme volatility and impaired liquidity as a result of the Coronavirus crisis,” Prophet executive David Rosenblum wrote.

Because of the crisis, the firm had decided “in turn” to block all investor redemptions for Prophet Opportunity Partners LP and wind down the fund over time, he added.

The fund, which primarily held hard-hit securities such as commercial mortgages and high-yield collateralized loan obligations, had a net asset value of $539 million as of Feb. 28, with $125 million in cash on hand and total debt of $117 million, according to the letter.

The fund was down 2.6% for 2020 through February, the letter showed. No March performance was given. Before the announcement suspending redemptions, it owed $120 million back to investors on Tuesday, March 31.

Prophet executives did not immediately respond to an email seeking comment. Prophet, based in Austin, Texas, manages approximately $2.4 billion overall, according to the letter.

Reporting by Lawrence Delevingne; Editing by Tom Brown

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