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

Bob Doll's Ten Market Predictions For 2016

Jan 7 2016 | 9:37pm ET

Well-known market strategist Robert Doll has published his annual list of ten predictions...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedge Fund Marketing - Making the Most of Your Salesperson

Jan 20 2016 | 8:11pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth takes a close...