OSS Capital Management will be winding up in the next six months as the hedge fund’s manager, Oscar Schafer, plans for succession.

Investors in the fund will be able to transfer to a new fund that will be managed by two of Schafer’s junior partners, Barry Lebovits and Joshua Kuntz, with Schafer himself serving as chairman, Schafer told Family Wealth Report.

The fund is slated to begin in the second quarter of 2012 and will be seeded by $50 million from Schafer.

According to Schafer, hedge funds have struggled to deal with succession in the past and historically the handing down of leadership within funds has not ended well. The ending of OSS Capital Management and the creation of a new fund is his and his junior partners’ attempt to jump this hurdle.

Although still unsure of the exact client numbers who will swap to the new fund, Schafer, Lebovits, and Kuntz are optimistic.

The winding down of OSS Capital Management comes after reports that it has lost 5 per cent of its value over the past year, after making 10 per cent gains in 2010 and 8 per cent in 2009, according to Barron’s. Both of these came after a reported 34 per cent loss in 2008, the publication said.

The 5 per cent loss so far this year still outperforms the HFRI Fund Weighted Composite Index, which has declined by 5.4 per cent year to date. Historically, the fund has had annual average performance of 6 per cent, according to the firm.