Jemmco Capital Winding Down Hedge Fund

Rather, Muschel says he's giving back the money because the fund, while profitable, had under-performed for the past three years. He also wants to spend more time with his family.

"I've consulted with my investors before this to discuss this decision at length,'' says Muschel. "They were impressed by my candor in the letter and that I made a very tough decision. They will be there in the future if I want to come back.''

But things have never been the same at Jemmco ever since Muschel told investors last September that the fund had been involved in market timing. The news, which was a surprise to many of Muschel's investors, sparked a rash of redemptions. By the end of the year, sources say, investors pulled nearly $300 million out of Jemmco. Muschel said the redemptions totaled $185 million.

In a Sept. 4 letter to investors obtained by TheStreet.com, Muschel told investors that "between 5% and 15%" of the fund's capital had been devoted to timing activity. While Muschel told investors that Jemmco had not engaged in any "improper activities," he announced the fund would immediately stop timing mutual fund shares. The letter was written a day after New York Attorney General Eliot Spitzer formally announced his investigation into abusive mutual fund trading.

The decision to give back money to investors won't necessarily mean the end of Jemmco, although both the fund and Muschel will play a diminished role in managing money for other people. Muschel and Jemmco will still manage a small $35 million fund called Kinetic Partners, which invests mainly in energy and utility stocks. The flagship fund also may remain open to a small group of investors.

He also will be working with RockView Partners, a new hedge fund that Muschel is an investor in, but will not be managing on a day-to-day basis. Jemmco's remaining staff will provide support services to RockView, which is managed by Kevin Schweitzer, a Jemmco portfolio manager.

"I would like to enjoy life more, rather than managing a big behemoth organization," says Muschel.

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