Icahn Gives Son Four-Year, $3 Billion Test Run

Aug 14 2012 | 1:17pm ET

Legendary trader Carl Icahn is giving his son the test of his life.

The 76-year-old activist investor is giving his son, Brett, and a trading partner $3 billion and four years to prove themselves, according to a regulatory filing. The elder Icahn won't give up total control of the money, retaining the final say over much of the younger's portfolio and specifying in a legal agreement that Brett and David Schechter are to invest in companies with market capitalizations of between $750 million and $10 billion.

The agreement ends in 2016, when Icahn will be 80. Icahn Enterprises has some $24 billion in assets; Brett Icahn and Schechter currently manage $600 million of it in what is called the Sargon portfolio.

Carl Icahn handed them $300 million in April 2010, and his son and Schechter have produced total returns of 96% on it.

"These two guys doubled our money over the last two years," he told Bloomberg News. "You can't complain about that."

Icahn Enterprises will kick in $1.8 billion of the new money Icahn fils and Schechter will manage, with Carl Icahn's High River adding another $600 million. But despite their track record, the savvy Icahn isn't giving his son, who joined the firm a decade ago as an analyst, and Schechter, who came about in 2004, a completely free hand.

Carl Icahn retains the right to set the portfolio's investment strategy. In addition, Brett Icahn and Schechter will need his approval to make certain bets. The agreement also strictly limits the duo's hedging strategies.

And while the deal expires four years from now, it also looks beyond, giving Icahn Enterprises and High River a 15% shares of the profits from any fund that Brett Icahn and Schechter launch after the agreement ends. It also gives the two traders the right to disclose their track record after four years, but specifies that they'll only be able to "market a permitted fund." And Icahn and High River get their share of the gross fees "in perpetuity."

For their troubles, Brett Icahn and Schechter will be paid 7.5% of any profits over a 4% annual hurdle.


In Depth

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.