Sat, May 30, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers June 2012

47N Series - The scandal of founders' shares.

47 Degrees North Capital Management is a specialist alternative investment firm, and a pioneer in early-stage hedge fund investing. It was selected as one of three successful candidates out of 97 applicants to manage the emerging hedge fund managers program at CalPERS.

47N is a leading proponent of corporate governance in the hedge fund industry; so the objective of this series of articles is to discuss and inform on current corporate governance issues.

Fraser McKenzie

The trust company scandal involving the Winchester House Group in Britain during the 1890's is an early example of the disadvantages of "founders' shares" for ordinary shareholders. The Economist of July 15th 1893 remarked; "Again and again we have warned investors against having anything to do with companies where founders' shares have existed...". Wise words indeed.

Founders' shares give control to the operators rather than the shareholders of an investment vehicle. In the case of Winchester House it was not until things had gone badly wrong that investors woke up to the knowledge that the unscrupulous founders had enriched themselves at their expense via the founders' shares. To add insult to injury, the damaging actions were later judged to be perfectly legal under the terms of the founders' shares arrangement.

Almost 120 years later, the problem of founders' shares still exists and with equal disregard by most hedge fund investors. But, as both distant and more recent history has taught us; the existence of this type of share class can represent a maj......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

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. Opalesque Exclusive: New TMT hedge fund adopts the long-term approach[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Adam Parker founded Center Lake Capital LLC in New York in November 2014. Before that, he was portfolio manager at Point State Capital (the successor fund to Dr

  2. Regulatory - Hedge funds face tax as Iceland poised to end capital controls, Comment: Why alternatives need more transparency, not enforcement[more]

    Hedge funds face tax as Iceland poised to end capital controls From Bloomberg.com: Hedge funds and other investors who bought claims against Icelandís failed banks face a tax that targets the lendersí estates as the government prepares to unveil its plan for exiting capital controls in t

  3. Investing - Nelson Peltzís Trian Fund Management reduces position in Legg Mason, Biotech investors up big amid bubble talk, Hedge funds increase exposure in healthcare[more]

    Nelson Peltzís Trian Fund Management reduces position in Legg Mason From Octafinance.com: Trian Fund Management has filled a SC 13D/A form regarding Legg Mason, Inc. Per Nelson Peltzís Trian Fund Managementís filing, the filler reported decreased stake in the company by -11.05% to 11,03

  4. All hedge fund strategies rebounded last week as market conditions normalize[more]

    Komfie Manalo, Opalesque Asia: After a difficult start this month, all hedge fund strategies ended last week in positive territory, as the Lyxor Hedge Fund Index gained 0.9% (-0.2% MTD, 3.3% YTD). According to Lyxor AMís latest Weekly Briefing, in t

  5. Billionaire hedge fund investor Odey says April 'bloody', has cut risk[more]

    From Reuters/Yahoo.com: Billionaire hedge fund manager Crispin Odey has cut risk and leverage following a stunning 19.3 percent loss in his 3.1 billion euros (2 billion pounds) Odey European Inc fund in April, a letter to investors seen by Reuters showed. Describing the month as "bloody", Odey

 

banner