Polygon Completes Flagship's Liquidation

Mar 7 2011 | 12:09pm ET

One of the longest wind-downs in hedge fund history has at long last been completed, with redeeming investors in Polygon Investment Partners' flagship hedge fund doing a good deal better than they must have feared when the fund nearly collapsed in 2008.

Polygon said it would pay investors 72 cents on the dollar to complete the liquidation of its once-US$7.5 billion Global Opportunities Fund. That fund lost almost half of its value in 2008, leading Polygon to both suspend redemptions and announce the planned liquidation of the fund. Last year, Polygon pledged to complete the wind-down by the end of this month.

The 72-cent figure was set by Credit Suisse, which ran an auction for the illiquid assets still held by the fund. But more than half of investors whose investment guidelines allow it won't be getting that, choosing instead to roll their investment into Polygon's new $500 million Recovery fund, which will include the remaining illiquid assets owned by Global Opportunities.

Investors, who were offered the opportunity to redeem three-quarters of their investment last year, may have been buoyed by the Global Opportunities fund's returns since the 2008 disaster. In 2009, the fund rose 12.4%, last year 8.8% and was up 6.1% this year.

Those investors who do choose to redeem will likely see their stakes in the new Recovery fund bought up by a variety of hedge fund secondary market players, including Coller Capital, Pomona Capital and Morgan Stanley Alternative Investment Partners. The Recovery fund will feature about a dozen private-equity-style direct investments; purchasers of third-party stakes will immediately begin paying performance fees, while current Global Opportunities investors will have those waived until the new fund's performance makes up for their 2008 losses.


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