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Scaramucci’s SkyBridge Restricts Client Exits Even as Crypto Skyrockets
(Bloomberg) — Anthony Scaramucci has effectively blocked clients from exiting SkyBridge Capital’s cryptocurrency-focused hedge fund even as returns have risen.
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Investors who own about 70% of the fund’s shares asked for their money back in the last redemption period that ended in March, according to a regulatory filing. The fund, which returns money through a tender offer, has repurchased about 7% of those shares.
Scaramucci, 60, declined to comment, but has previously said the fund allows him to limit redemptions and that he is “operating within the prospectus.”
SkyBridge began limiting withdrawals two years ago, during the so-called “crypto winter,” when the fund suffered huge losses and investors tried to flee.
Cryptocurrencies have since seen a resurgence.
Bitcoin is up about 150% in the 12 months ended March 31, and the SkyBridge fund is up 46.4%. Yet many customers want Mooch, as the company’s founder is known, to stop holding onto their cash.
Morgan Stanley’s private clients make up about 70% of the fund’s $1.6 billion, according to people familiar with the matter, and the bank has been trying to get them out for more than a year.
A bank spokeswoman declined to comment.
Gating Investors
Hedge funds typically limit redemptions, a practice known as gating, only when they hold investments that are difficult to sell and the redemptions would disadvantage remaining investors. Others limit redemptions during poor performance as a way to retain capital.
Brett Messing, co-chief investment officer of SkyBridge, froze investors in his previous fund, GPS Partners, after it fell nearly 15% in January 2008. Less than a fifth of his clients asked to withdraw their money.
At SkyBridge, recent strong performance, including a 26% jump in the first quarter, has barely erased previous losses. In the five years ended March 31, it posted annualized returns of less than 1%.
At year-end, the company had total assets under management of about $2 billion, down from a peak of $9 billion in 2015.
Its founder is perhaps best known for serving as then-President Donald Trump’s communications director for 11 days in July 2017, until he was fired after a profanity-filled interview with The New Yorker. Scaramucci also founded the hedge fund conference SkyBridge Alternatives, known as SALT.
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SkyBridge was previously known for investing in other hedge fund managers such as Steve Cohen, Dan Loeb, and Izzy Englander. While it still has some of those investments, it has begun to pivot into cryptocurrencies as of 2020.
According to a filing, at the end of the first quarter the fund held 57% cryptocurrencies and digital assets, 21% multi-strategy funds, 7% equity funds and 15% structured credit funds.
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