Sun, May 1, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Goldman Sachs to pull out $120m from Falcone’s Harbinger Capital, Blackstone submits withdrawal notice too

Thursday, November 11, 2010
Opalesque Industry Update – Philip Falcone’s Harbinger Capital Partners, once one of the biggest hedge funds in the world, is having a terrible year. First, its flagship fund, the Harbinger Capital Partners Fund has fallen by 15% YTD (through Oct. 15, 2010). And second, two of the most significant investors into hedge fund have made clear their intent to pull their money out of the firm, various media reports said.

Goldman Sachs Group Inc., has submitted a request to withdraw all of its $120m from Falcone’s main fund because of lagging returns and reports that he borrowed $113m in October 2009 from a smaller fund that had suspended redemptions, to pay for his personal taxes, according to a report by Bloomberg.

In its September report, Bloomberg Markets Magazine disclosed that Falcone made the loan from- the Harbinger Capital Partners Special Situations Fund at a time when the investors were barred from withdrawing from the existing funds because some of its assets were tied up in the Lehman Brothers Holdings Inc. bankruptcy case.

But Falcone downplayed the effect of Goldman’s pull out decision and even described it as “a non-event” in an email sent to Reuters.

Reuters added that several investors have already expressed their concerns over the negative performances of several Harbinger funds in the past several months. Many stakeholders were questioning Falcone’s decision to launch an upstart internet company called LightSquared, which plans to bring broadband internet access across the United States using satellites and a network of land-based cell towers.

Investors do not need extra risk factor
Howard Eisen, co-founder of New York-based FletcherBennett Group LLC, a hedge fund consultancy, said that investors are wary of additional risk factors and such risk was highlighted by Falcone’s personal loan from one of his funds.

Eisen told Bloomberg, “We are in an environment with scarce capital inflows so if there is an additional risk factor from anywhere, including a large client redeeming, allocators won’t take the risk of ignoring it -- they at least have to look into it.

Dwindling assets
At its peak, Harbinger managed $26bn in assets, particularly after its success in betting against subprime mortgages in 2007. Currently, the fund has an estimated $9bn in AuM and with the announcement of these redemption notices, that is expected to slide even further.

Harbinger’s $2bn Special Situations fund has initiated to wind down its operations in September. Owners of 80% of assets in the fund have already opted to redeem their investments and are expected to receive their money back as the fund’s positions are sold.

More withdrawal requests
The Bloomberg report added that another Harbinger investor, the New York State Common Retirement Fund, also sent a request redeem $41m of its investments from the firm’s core fund.

Second major hedge fund investor reported to be redeeming from Harbinger is Blackstone Group, reported The Journal.

However, The Journal did not provide details how much money Blackstone would withdraw from Harbinger, although it clarified that a withdrawal notice does not necessarily mean a pull out of money. Rather, the notice or redemptions gives Harbinger 90-days to make the money available in case the investor finally decides to pull out his money, however the investor may change their mind prior to redemption deadline and opt to keep their assets invested in the fund.
- Precy Dumlao
PD

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Hedge funds see $14.3bn outflows in Q1, CTAs and multi-strategy lead net inflows[more]

    Komfie Manalo, Opalesque Asia: The hedge fund industry saw net outflows of investor capital in the first quarter of the year, totaling $14.3bn, data from Preqin showed. This continues from the $8.9bn overall net outflows that funds recorded in Q4

  2. Third Point calls Q1 "catastrophic" for hedge funds[more]

    Bailey McCann, Opalesque New York: The first quarter of this year was rocky for hedge funds based on aggregate performance from the industry, but now we are beginning to hear what the managers thought of it as quarterly letters make their way to investors. Dan Loeb, CEO of New York-based $17 bill

  3. Asia - Stabilization of China's capital outflows may hinge on Janet Yellen, Fink says China to do well this year as bubble threat postponed, Chinese hedge fund to invest in India’s infrastructure[more]

    Stabilization of China's capital outflows may hinge on Janet Yellen From Bloomberg.com: Whether China’s recent stabilization of its currency and capital outflows continues -- or downside pressure reignites -- may hinge in large part on Janet Yellen. If the Federal Reserve chair sticks to

  4. …And Finally - After all, judges are human too[more]

    From Newsoftheweird.com: In March, one District of Columbia government administrative law judge was charged with misdemeanor assault on another. Judge Sharon Goodie said she wanted to give Judge Joan Davenport some files, but Davenport, in her office, would not answer the door. Goodie said once the

  5. Comment - Unmasking the men behind Zero Hedge, Wall Street's renegade blog[more]

    From Bloomberg.com: Colin Lokey, also known as "Tyler Durden," is breaking the first rule of Fight Club: You do not talk about Fight Club. He’s also breaking the second rule of Fight Club. (See the first rule.) After more than a year writing for the financial website Zero Hedge under the n