Absolute Capital Blocks Redemptions, Proposes Fund Restructurings

Sep 19 2007 | 2:31pm ET

Absolute Capital Management Holdings is trying to stop the bleeding by blocking investors from withdrawing money from eight of its hedge funds, which in total manage $2.1 billion.

One day after its co-founder, Florian Homm, abruptly resigned over compensation issues, the firm told investors today that they shouldn't expect redemptions for a year while it restructures the funds.

“The preliminary results of this review indicate that seven of the eight Absolute Capital equity funds contain quoted investments, which the Board believes are not immediately realizable at their stated values due to their illiquid nature,” the firm stated.

“Subsequent to Florian Homm's resignation, the Company has received in excess of $100 million in redemption notices, which, combined with the illiquid positions described above, will force the suspension of the calculation of the funds' net asset values and investors' ability to redeem fund shares in the normal course.”

As a result, the Board is restructuring the equity funds to create a side pocket share class structure whereby the illiquid positions would be transferred into separate portfolios, according to the firm. Following the restructuring, investors will hold two share classes in each of the funds: a liquid portfolio and an illiquid portfolio.

“As part of this proposed restructuring, the equity funds would seek a 12 month lock-in from all investors. The effect of this action will be to close the affected funds to redemptions for the period, thereby ensuring that all investors in the funds are treated equally,” the firm said.

The firm added that a large part of its assets under management comprising its fixed income and real estate businesses, “which are managed independently and have approximately $1 billion and $130 million respectively under management, are not affected by these matters.”

After falling 70% yesterday, Absolute Capital shares dropped a further 48% today.


In Depth

Hedge Fund Veteran Peter Borish Talks Trading

Dec 17 2014 | 9:32am ET

Peter Borish says 2014 was “tricky” from a trading perspective. “The best...

Lifestyle

Cohen Donates $1.5M To GOP Governors Association

Dec 10 2014 | 7:13am ET

The Republican Governors Association raised close to $25 million from October 1...

Guest Contributor

Q&A With Daniel Gallancy: Institutional Interest In Bitcoin Is Growing Steadily

Dec 12 2014 | 7:54am ET

Daniel Gallancy is founder and CEO of SolidX, a provider of total return swaps for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

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.