Archeus Capital, a hedge fund run by two former Salomon Brothers bond traders, has become the latest to announce it will close. Its assets had fallen to about $700 million from $3 billion a year ago as investors stampeded out of the fund. The founders blamed an administrative snafu that somehow prompted some big investors to pull out. Some bad bets also may have had something to do with it, however. The fund had made some losing wagers on natural gas. That followed the apparent breakdown of its previous winning streak in bond arbitrage. This highlights a cycle: Bad news leads to spooked investors, which leads to redemptions, which leads to portfolio liquidation trauma, which leads to a closed fund. Can't say any of this surprises me. In fact, we'll likely see more of this--Amaranth may have been the start of something. Meanwhile, another hedge fund, D.B. Zwirn & Co., is grappling with issues related to improperly expensed items. It has conference calls with investors to discuss the expenses and the accounting import. The danger, again, is a flood of redemptions.

For more on Archeus:
- Here's a New York Times article [1]

For more on D.B. Zwirn & Co.:
- Here's a New York Post article [2]