Deephaven Capital Management
| Company type | Subsidiary |
|---|---|
| Industry | Hedge fund management |
| Founded | 1994 |
| Founder | Irvin Kessler |
| Defunct | 2009 |
| Fate | Ceased operations; assets transferred to Stark Investments |
| Headquarters | Minnetonka , United States |
Area served | Global (including London and Hong Kong offices) |
Key people | Irvin Kessler (founder) |
| Products | Hedge funds, event-driven investment strategies |
| Parent | Knight Capital Group (from 2000) |
Deephaven Capital Management, LLC operated as a subsidiary under Knight Capital Group, overseeing a variety of hedge funds. The company ultimately ceased operations due to underperformance influenced by the broader macroeconomic climate.
History
Established in 1994 by Irvin Kessler with an initial capital of $5 million, Deephaven focused on event-driven investment strategies and managed six hedge funds from locations in Minnetonka, London, and Hong Kong. At its height, the firm’s assets under management reached $4 billion. Kessler sold the company to Knight Capital Group in 2000 but continued his involvement for several years before launching Provident Advisors and subsequently Walleye Capital.
In 2006, the SEC conducted an investigation into Deephaven concerning insider trading allegations tied to 19 Private investment in public equity (PIPE) transactions. The firm agreed to pay $5.8 million covering disgorgement, penalties, and interest, including $2.7 million for illicit gains. The portfolio manager involved was also fined $110,000 in civil penalties.
By the end of 2008, Deephaven suspended redemptions on its Global Multi-Strategy Fund, which had $1.6 billion in assets following a 32% loss that year and subsequent investor withdrawals amounting to 30%. Before 2008, the fund had consistently delivered annual returns averaging 16%. During that year, Deephaven reported a quarterly pretax loss of $5.7 million, with total assets shrinking from $4 billion to $2.7 billion by October.
In 2009, Deephaven transferred the Global Multi-Strategy Fund’s assets to Stark Investments for a maximum consideration of $44.5 million, receiving an upfront payment of $7.3 million. After this transaction, remaining holdings were liquidated, including office furnishings sold at a significant discount to local asset manager Disciplined Growth Investors.