Lehman Payouts Flow To Hedge Funds

Sep 13 2013 | 12:31pm ET

Lehman Brothers' collapse five years ago was a nightmare for some hedge funds—which counted the firm among their prime brokers. But it's proven a boon for others.

Over the past year-and-a-half, a number of hedge funds have bought up claims against the Lehman estate from creditors willing to sell them at a discount. And they are now reaping the rewards, with payouts to creditors expected to reach $80 billion, $50 billion of which has already gone out.

Among the hedge funds taking their share are Elliott Management, which was a victim of the collapse as a Lehman prime brokerage client but has since turned a $700 million profit on Lehman claims, and Paulson & Co., which is up more than $1 billion. Elliott bought claims with a face-value in excess of $587 million two years ago; Paulson has bet $4 billion on them. The Wall Street Journal reports.

Other hedge funds getting a piece of what's left of Lehman include Halcyon Asset Management, King Street Capital Management and Solus Alternative Asset Management.

"In the beginning, you didn't know what the distribution schedule is like," Solus' C.J. Lanktree told the Journal. "You're taking a lot more risk" buying or holding a Lehman claim, rather than selling it.


In Depth

Q&A: Star Mountain's Brett Hickey On Investing In 'The Growth Engine Of America'

Sep 22 2017 | 5:06pm ET

Lower middle-market companies form the economic fabric of the nation, but they can...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...

 

From the current issue of