Archeus hedge fund firm to shut by end of 2006

SAN FRANCISCO (MarketWatch) — Archeus Capital Management LLC, a New York-based hedge fund firm that once oversaw roughly $3 billion in assets, plans to shut down by the end of 2006, according to a letter the firm sent to investors.

Archeus said it hadn’t been able to recover from a series of investor redemptions that were sparked by record-keeping problems, an investor who’s seen the firm’s letter said on condition of anonymity.

Archeus said it currently oversees roughly $700 million in highly liquid assets. The firm plans to liquidate its funds and return money to investors based on the value of its assets as of Dec. 31, 2006.

Gary Kilberg, chief executive of Archeus, didn’t immediately return a call seeking comment on Monday afternoon.

Kilberg co-founded Archeus in 2003 to focus on trading bonds and derivatives. Within a few months, the firm suffered “sharp” losses as its main strategy fell out of favor, according to a New York Times report earlier in October.

That was exacerbated by the failure of the firm’s administrator to keep proper records, and the firm’s assets plunged, the newspaper added.

Returns in 2006 were a negative 1.9%, the New York Times noted in early October.

In its letter to investors, Archeus said returns from its main fund were modest, while a more aggressive fund performed better.

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