Tudor to Shut Down Small-Stock Hedge Fund Managed by Pallotta By Jenny Strasburg June 6 (Bloomberg) -- Tudor Investment Corp., the hedge-fund firm run by Paul Tudor Jones, is shutting its $550 million small- company stock fund after returns failed to meet the manager's expectations. ``We have been frustrated with the lack of viable ideas in the small-cap arena,'' James Pallotta said in a letter yesterday to investors in his Witches Rock Fund Ltd. Tudor, which oversees $17.7 billion, will refund clients' money this month, including $25.3 million of performance fees accrued since the fund opened in December 2004. The Russell 2000 Index, a benchmark for companies with market values of less than $1 billion, is trailing the Standard & Poor's 500 Index by 0.2 percentage points this year after beating the gauge for big stocks by an average of 1.1 percentage points annually in the prior decade. ``Small-cap is already a crowded space, and it's difficult to deploy serious capital because of the capacity constraints,'' said Matthew Zorn, senior hedge-fund analyst at Commerzbank AG in New York. The Witches Rock fund has returned almost 24 percent net of fees since inception, the 49-year-old Pallotta said in the client letter. That compares with gains of 31 percent by the S&P 500 Index and 35 percent by the Russell 2000. The fund's net return rises to 30 percent with the refunded fees. Witches Rock's clients originally committed capital for four years ending Nov. 30, 2008. Tudor spokesman Steve Bruce declined to comment. More: http://www.bloomberg.com/apps/news?pid=20601014&sid=afY5hLRN5v0Y&refer=funds