European Bank Distress Requires Investor Patience

Chidem Kurdas

Much touted for several years, the trade

Falcone Keeps Distress in Side Pocket

Chidem Kurdas

The moves of Philip Falcone of Harbinger Capital could be considered a novel kind of

Asked to Vote, Some Walk

Fund managers sometimes seek their clients’ consent

Closed Centaurus Fund’s Upside

In the middle of the financial meltdown in December 2008, Centaurus Alpha Fund went down like so many other funds. Investors rejected the management’s lockup proposal and so the firm decided to close the fund. Selling the assets in the portfolio and returning the money to investors took years. Meanwhile, of course, markets recovered. 

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Regulators May Examine Private Equity Valuation

Chidem Kurdas

The Dodd-Frank Act mandates the registration of hedge fund and private equity advisers with assets over $150 million. Venture capital managers and family offices are exempt from the registration requirement, but not private equity.

Once private equity managers become registered investment advisers, like all RIAs they will be subject to examinations by the Securities and Exchange Commission. The SEC looks at valuation polices and practices, among other issues. Private equity valuation will be scrutinized and has to be documented and supported, says Sal Shah, a partner at accounting firm McGladrey.

Models Compete-Man, Investcorp, Blackstone

Chidem Kurdas

Man Group’s acquisition of GLG Partners, with $24 billion in assets, brought up questions about the future of alternative investment businesses.  For growth, is it better to rely more on mergers and acquisitions or wait for investors to come? Do companies with diverse strategies have an advantage?

Money Flows: Fortress Surprises

Chidem Kurdas

First quarter net capital inflow to hedge funds was positive but small—$2 billion according to Credit Suisse Tremont Hedge Index data, out of total industry assets of around $1.5 trillion.

With that number in mind, it is impressive that Fortress Group raised over $1 billion (gross) for its various funds during the quarter. At the same time, however, the assets of the firm’ global macro funds decreased, albeit slightly from $3.4 billion to $3.3 billion.

Side Pockets Persist

Chidem Kurdas

Even as markets and hedge fund returns recovered from the crisis of 2008, some managers continued to keep hard-to-sell assets in separate portfolios that have restricted redemption. The practice was initially a response to extraordinary circumstances but persisted largely because managers believe they can salvage losing investments if given more time.

Side pockets limit withdrawals by investors while the agreed-upon redemption conditions still apply to the assets in the fund proper. Thus some of Perry Capital’s investments were moved to side pockets after losses in 2008. The losses came in part from Perry’s trades in Porsche’s attempted takeover of Volkswagen.