Metropolitan Opens Best Ideas Fund To Outside Capital

Jul 30 2007 | 11:41am ET

New York-based Metropolitan Capital Advisors has opened its Metropolitan Capital Advisors Select Fund to outside capital, following 13 months of trading with proprietary capital. The firm is looking to raise about $200 million for its latest best ideas fund. 

The offering is derived from its $107 million flagship, Metropolitan Capital Advisors. Investors in that fund wanted greater concentration in their portfolios and were willing to accept higher volatility for higher returns, according to David Fried, managing director. Year-to-date, the flagship fund is up 11.72% net and has averaged 15.44% since inception in July 1992.

The new equity-focused event-driven fund is predominantly focused on mid-cap stocks in the U.S. and Europe. Seeded last May with $4 million, it has returned 14.12% this year through June with a 12-month rolling return of 22.27%.

“Mostly what we’ve looked at are turnaround situations because we’re a value-oriented, bottom-up hedge fund,” said Fried. “We’ve made money in some financials, basic materials, energy and retailers. We’re very focused on restructurings right now in terms of companies selling off divisions and there are very good opportunities in this space right now. So value equities with a catalyst is where we thing we’re going to make our money right now.”

Some of the fund‘s current holdings include Home Depot, Kraft Foods and Flowserve Corp., a manufacturer and supplier of pumps, valves and seals. Seventy percent of the fund’s portfolio is in domestic names with the remaining balance in European stocks. “We also see some interesting opportunities in some European financial names,” said Fried.

The fund charges 1.5% for management and 20% for performance, with a $1 million minimum investment requirement.

Metropolitan Capital was co-founded June 1992 by Jeffrey Schwarz and Karen Finerman. Prior to founding the firm, Schwarz served as president of the Metropolitan Capital Group, a financial advisory group specializing in the purchase of distressed securities. Finerman previously served as the head of research for the risk arbitrage department for Donaldson, Lufkin, & Jenrette Securities Corp. The firm currently manages a total of $405 million in hedge fund and separately managed account assets.

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