ESL Sees Investors Pull $3.5B

Dec 6 2013 | 2:16pm ET

ESL Investments is returning more than half of its outside capital to investors, primarily clients of Goldman Sachs who invested at the height of founder Edward Lampert's renown.

Goldman clients are redeeming all of the $3.5 billion they invested in ESL in the summer of 2007—filing their requests late last year, as soon as the five-year lockup he imposed expired, The Wall Street Journal reports. Those exits, as well as that of longtime investor Michael Dell, will leave ESL with about $2.5 billion in outside capital.

ESL is paying out the redemptions, at least in part, in kind, issuing shares instead of all cash. Earlier this year, redeeming clients got shares of Sears Holdings spinoff Orchard Supply Hardware Stores, and recently got about $375 million in shares of Sears itself, where Lampert is CEO. That most recent payout cost Lampert a majority stake in the retailer.

Still, most of Lampert's longtime investors are sticking with ESL, according to the Journal. In spite of Sears' difficulties, the hedge fund posted gains both last year and this one, and has an annualized return in excess of 20% over the past 20 years.

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