Jeffrey Larson, former head of one of last year's big hedge fund implosions -- Sowood Capital -- is looking for a second act. After losing $1.6 billion -- over half of his failed firms assets -- he's in the process of trying to start up a new much smaller ($250 =- $500 million) version of the ill fated Sowood. According to the Boston Globe:
Larson, 50, was a successful manager of the Harvard University endowment fund before leaving to start Sowood in 2004. Harvard was his largest client at the outset; the university's endowment, valued today at nearly $35 billion, lost $350 million in Sowood. The Massachusetts state pension fund lost $30 million, while the Boston Foundation lost nearly $20 million.
Larson intends to use an investment strategy similar to Sowood's, according to people briefed on his plans. His Sowood fund was originally "market-neutral," that is, investing in stocks and also using put options - securities that give an investor the right to sell a stock at a certain price, and which gain value as the underlying stock's price falls - as a hedge against losses.
Larson would likely stay away from the debt investments that got him into trouble last summer, people who know him said. Sowood had accumulated a large position in corporate debt, which began to plummet in value last year around the time of the subprime mort gage implosion. The firm borrowed heavily to make some of these bets, which Larson had to repay as the investments were losing value, and, at the same time, the hedges that he placed for protection backfired.
Sowood manager looks to come back - Boston Globe
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