BOSTON, May 17 (Reuters) - Hedge fund Pagoda Asset Management is shutting down at the end of the month, becoming the latest casualty in the $3.2 trillion industry after a period of sluggish returns, a source with knowledge of the move said on Thursday.
New York-based Pagoda was launched four years ago by Adam Bernstein, Glenn Vogelman, and Jeffrey Holycross and specialized in betting on telecom, media, technology and consumer stocks. At the end of last year it managed $566 million and posted small gains.
Pagoda notified investors of its decision to shut down by letter on Thursday. A representative for the firm declined to comment.
The three founders had worked together at JP Morgan Chase's Highbridge Capital Management and generated enough buzz as they set off on their own to raise $100 million for their new launch. In 2015 Bernstein, the firm's chief executive officer, was named a Hedge Fund Rising Star by Institutional Investor.
Months after being honored by the publication, Bernstein laid out his hopes and dreams for investors. Pagoda would become an "institutional-quality hedge fund that would generate superior, risk-adjusted returns for investors," Bernstein wrote in a letter, adding that he "could not be happier about Pagoda's early success."
But returns since then have been modest, climbing 1.4 percent in 2016 and 3.3 percent last year. The firm is up 1.1 percent this year, an investor said.
At the end of last year Pagoda's top investments included industrials company KAR Auction Services, Melco Resorts & Entertainment Ltd and Tapestry, Inc., according to a government filing.
Even as Pagoda was in the black, it was becoming tougher for small and medium sized funds to raise fresh capital and stay in business. Many investors have tired of the hedge funds' largely lackluster returns and high fees, moving money into less expensive index funds as the stock market marched higher over the last years.
Pagoda joins Hutchin Hill Capital, Magnolia Road and Folger Hill Asset Management, all hedge funds that have shut down completely recently or merged with others. (Reporting by Svea Herbst-Bayliss and Lawrence Delevingne; Editing by Tom Brown)