Nathanial Rothschild's Atticus hedge fund adds to his problems
The hedge fund chaired by Nathanial Rothschild has lost billions of pounds after underestimating the global economic slowdown.
Mr Rothschild, who is embroiled in an explosive public row with George Osborne, the Shadow Chancellor, is co-chairman of Atticus Capital, a New York hedge fund.
Atticus has been forced to issue a frank apology to some of its wealthy investors after their investment in the fund almost halved in less than a year.
Atticus' European fund has fallen in value by 43.5 per cent during 2008, the fund manager said in a private letter to clients earlier this month.
David Slager, the Atticus executive who runs its European investments, told investors: "I regret and am intensely disappointed by this performance."
In a letter dated October 3, Mr Slager said that the European fund had lost 15.8 per cent of its value in September alone.
The firm's other main fund, Atticus Global, was down 27.2 per cent on the year.
At its peak, Atticus controlled investments worth around $20 billion and delivered huge profits for its investors. In 2005, Atticus returned 45 per cent. In 2006, its returns were 30 per cent.
But Atticus has seen its value slashed by more than $5 billion after badly misjudging the scale and severity of this year's global economic downturn. "I was late to perceive the magnitude of this crisis," Mr Slager said.
Last month, the firm issued a public statement denying Wall Street rumours that it was about to shut down and insisting that is was actively looking for new investment opportunities.
But the market's poor performance has forced Atticus to look for less risky investments, reducing its stakes in certain companies.
In his letter, Mr Slager revealed that more than half of his fund's net asset value is now held in US Treasury bonds and cash - ultra-safe investments paying only the minimum return.
In previous years, Atticus' stellar returns made its senior executives spectacularly wealthy.
Alpha, a hedge fund industry magazine, put Mr Rothschild's 2007 pay at $250 million.
He is reported to have made that money by investing using his own money in the Atticus funds.
This year's disappointing performance could leave him facing personal paper losses running into hundreds of millions of pounds.
Mr Rothschild neither trades nor invests on behalf of the fund, instead using his extensive contacts to bring in investors. He also helped recruit Mr Slager, an Oxford University contemporary who previously worked for Goldman Sachs.
Mr Slager, who attended Haberdashers' Aske's school in Elstree in Hertfordhire, was paid $450 million in performance and management fees last year.
The poor performance of Atticus this year may increase the importance to Mr Rothschild of his other financial interests.
In a private capacity, he acts as an adviser to Oleg Deripaska, Russia's richest man, and the pair are involved in a $200 million project to develop a former military dock in Montenegro into a luxury leisure resort.
Mr Rothschild, who has homes in New York, London, Moscow and Corfu, is single having divorced in 1998.
He married Annabelle Neilson, a model, in 1995 after eloping to Las Vegas.
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