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Andor Capital Closes the Book on a Rough Year

The hedge fund giant's growth plans are shelved.
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Giant hedge fund Andor Capital Management started the year telling its employees to grow and grow. It ended by showing nearly 20% of its workforce the door.

The $8.2 billon firm spent the year losing money in at least three of its hedge funds and in its fourth quarter shedding workers, laying off at least 30 people including portfolio managers, senior and junior analysts and support staff.

Though Andor, because of corresponding hirings, ends the year with the same 170 employees it began it with, the failure of its expansion plans reflects a brutal year for the onetime powerhouse. The firm dropped $800 million in trading losses and investor withdrawals between May and December.

Andor's troubles were highlighted when the firm told investors earlier this month that money-losing portfolio manager David Felman, whose two hedge funds were down 17% and 21.5%, respectively, at the end of November, left over performance issues.

Jolyne Caruso, the Stamford, Conn.-based fund's president, declined to comment on the layoffs, but a person who knows the firm well said 2003 was a rough one.

"They were adding people and thought they'd be growing," he said. "They've had a very tough year and had to make some very tough decisions."

The end of the year wasn't pretty, according to a former employee.

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"I stopped keeping count" of the number of people who left, one former employee said. "It was just really tense. This whole year was really bad and really hard."

Among those who left the firm or were laid off since June are senior analyst and vice president David Strasser, technology fund portfolio manager Nick Romano, senior trader Tom Blessing and senior analyst Tom MacNamara. At least three junior analysts also were laid off, as were about 20 support staff for the firm's hedge funds and legal department.

Andor employees are well-paid, routinely pocketing 30% to 40% of their base salaries as bonuses in a good year. Still, founder Daniel Benton has never been one to countenance failure gladly.

"Dan ran the place with an iron fist," the former employee said. (Benton founded Andor in 2001 after parting ways with Art Samberg, with whom he ran Pequot Capital Management.)

Benton's flagship Andor Technology Fund was down 14% at the end of November as the


continued to rise. It was the first time in 10 years the fund has lost money.

Benton and chief investment officer Chris James took over management of Felman's funds, and the firm is focusing on attracting more institutional investors in 2004. Despite its sharp drop in assets under management, Andor brought in $1.5 billion in new investments this year and remains among the world's five-largest hedge fund managers.