The sudden collapse of Sowood Capital Management's hedge funds has burned a number of high-profile charitable groups and foundations in Colorado, forcing them to scrutinize their investment portfolios.

The Daniels Fund, the Denver Foundation, Children's Hospital, the University of Denver, the Chambers Family Fund and the Colorado State University Foundation are among the organizations that entrusted money to Boston-based Sowood.

Monticello Associates, based in Denver, is the link between Sowood and the Colorado groups in most of the cases. The investment adviser had recommended Sowood as a promising hedge fund for their portfolios, according to several foundation officials.

Monticello representatives did not respond to three messages left during business hours Wednesday - one voice mail and two left with the person answering the office phone.

The losses run in the millions of dollars but represent relatively small amounts of money for these organizations, considering their total assets. The groups also stressed they are well-diversified and able to absorb such a hit.

But the Sowood story underscores the risks that foundations and endowments often take when they invest in hedge funds and other alternative investments to maximize their wealth.

The Daniels Fund, the largest foundation in Colorado with $1.2 billion in assets, gave about $25 million to Sowood, and about half of that investment was wiped out in a matter of weeks.

"We take this loss very seriously, and we're closely examining our portfolio for anything else that may be there," said Peter Droege, vice president of communications for the Daniels Fund. "We're continuing to seek information on what happened."

Sowood, founded by Jeff Larson, a former manager at Harvard University's endowment, lost more than half of investors' $3 billion because of bad bond market bets. In a July 30 letter, he tried to explain his firm's demise, saying "a loss of this magnitude in such a short period is as devastating to us as it is to you."

Sowood is expected to return about $1.4 billion to investors. The firm said it "made the painful and difficult decision to sell substantially all" the portfolio to Citadel Investment Group.

The Daniels Fund, a charitable organization that has recently supported homelessness, aging and educational initiatives, said the loss is about 1 percent of assets, a hit it is easily able to digest thanks to diversification.

Monticello had "identified" Sowood as a suitable investment, Droege said.

The Chambers Family Fund, which says it promotes economic self-sufficiency for women, arts and culture, democratic values and other causes, invested $2.5 million with the Sowood Alpha Fund, records show.

University of Denver spokesman Dave Brendsel confirmed the school is an investor in Sowood Capital but declined to say how much was lost.

The CSU Foundation, acting on Monticello's advice, put $9 million into Sowood. The investment rose to $11.5 million before the hedge fund tumbled. In the end, the foundation probably will take a loss of $3 million, Chief Executive Officer Kathleen Henry said.

"Jeff Larson had impeccable credentials and a fabulous record," Henry said. "And, for a couple of years, he gave us really good returns. Unfortunately, it just didn't work out."

Henry noted that Monticello "has served us well over the years," and her counterparts at other foundations across the state agreed.

She added: "We're fully confident it won't impact our ability to meet the needs of the university."

The University of Colorado Foundation, the school's fundraising arm, did not invest with Sowood hedge funds, public documents show.

Children's Hospital and its foundation handed $2 million to Sowood, a tiny fraction of their assets.

"In the last 12 months, the combined return, including the recent loss of $1.2 million on the Sowood investment, has been over 11.5 percent," Len Dryer, hospital CFO, said in an e-mail statement. "The investment committee meets on a regular basis to review all of its investments and feels comfortable with its diversified portfolio."

The hospital in its annual report cited Monticello's "solid guidance."

The Denver Foundation, which raises money from area donors and provides grants to charities, had nearly $14 million, or 3 percent of assets, in Sowood Capital at the end of May. The organization invested $10 million in the hedge fund in late 2004 and saw the sum grow to $14 million before it was abruptly cut to $5 million or $6 million, CEO David Miller said this week.

Although the roughly $8 million the Denver Foundation lost is a sizable chunk, it is less than 2 percent of the group's assets.

The foundation's assets are spread around and, even with the Sowood loss, have grown 7 percent in 2007 through July, Miller said. To try to put the decline in perspective, Miller said one of its 40 money managers posted a return of 8.2 percent in July alone.

Assets entrusted to hedge fund

How much money was invested in a Sowood Capital Management hedge fund

• The Daniels Fund   $25 million

• The Denver Foundation   $10 million

• Colorado State University Foundation   $9 million

• Children's Hospital and foundation   $2 million

• Chambers Family Fund   $2.5 millionSources: The Institutions Or Public Filings

patonj@RockyMountainNews.com or 303-954-2544

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