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Derivatives

London Hedge Fund Shuts Its Doors

Algometrics, a London-based alternatives investment house, is closing and has returned the remaining USD85 million to investors. Stephen Smith, founder and managing director in London, said the firm and its managed fund, Algometrics Ltd., is winding down because it was having trouble raising additional capital. "It had become difficult to make money in a systematic way," he said, adding that the fund was not making the 15-30% returns that hedge fund investors demanded before they would contribute funds, declining to comment on the funds' performance. The fund, which specialized in statistical arbitrage and other quantitative trading in equities and fixed income, moved all its capital into cash in January after it stopped trading in Europe.

Algometrics used a range of equity derivatives, including options, contracts for differences and futures. It also acted as an options market maker to give investors an opportunity to take on exposure to market-making profits.

Smith said he would be taking time off and had not yet decided on his next move. "I'll be back in some form or another," he added. Prior to founding Algometrics, Smith was an equity cash and derivatives trader at Banque Indosuez in London and Tokyo. The firm has made its 14 employees redundant.

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