Ramius-Cowen Focus on Pipeline

Chidem Kurdas

Hedge fund firm Ramius acquired investment bank Cowen last year. It was probably a smart move to expand the capital base as well as the skill set as Ramius faced substantial redemption requests.

Net redemptions since the beginning of 2009 are more than $3 billion, including $459 million withdrawn by clients this January. As a result, assets fell 26% from $10.6 billion to less than $7.9 billion, factoring in a performance gain in 2009. The January datum suggests that redemptions have slowed but may continue.

With lock-ups in certain investor contracts allowing for redemption in March and June,  more money could come out of Ramius’ hedge funds. But chief strategy officer Jeffrey Solomon says to date redemptions are relatively small for investors in funds with rolling lock-ups, meaning that if people don’t withdraw during the specified times, another lock-up will come into effect for two years—to the manager’s benefit.

Still, the key issue is whether capital inflows will resume. Cowen chief executive Greg Malcolm says people have started to make investment decisions, whereas a year ago they might show interest but would not make a decision.

Mr. Solomon says the pipeline of potential new investment mandates is quite strong as the new assignments are being realized. “For example, during the beginning of 2010 we’re happy to report that we closed on $100 million managed account for our new credit product,” he told analysts.

Ramius includes a $1.6 billion hedge fund business as well as approximately $2.4 billion in funds of funds. Sounds like the event-driven and credit hedge funds are more attractive to investors. Funds of funds are a tough sell these days, but there is interest in Ramius’ activist portfolio with a hedging overlay that made only a small loss in 2008 – unlike most funds – and returned over 12% in 2009.

“We’re hopeful that we will begin to receive commitments from a number of our prospective clients in the pipeline,” says Mr. Solomon.

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