Ex-Silver Rock Execs Prep New Fund With Novel Fee Approach

Oct 28 2016 | 10:22pm ET

Former Silver Rock Financial executives David Goldburg and Adam Scotch are close to launching their new event-driven hedge fund firm early next year.

The new company, named Battlebourne Capital Management, will be based in New York and will invest in debt and equity securities of undervalued companies, according to a Bloomberg article. 

The fund plans to raise $100 million from investors partly through the use of an innovative fee structure that functions a bit like a cash-back credit card – investors receive a rebate on the fund’s incentive fees depending on the level of fund assets and size of fund returns, Bloomberg noted citing investor documents. The higher the assets and returns, the higher the rebates will be. 

In addition, fees for the new vehicle will be lower than industry standard, at 1-1.5% in management fees and 10-13.5% in annual incentive fees, both significantly lower than the traditional 2-and-20 model.

Hedge fund fees have been at the forefront of recent criticism by pension funds and other institutional investors who have paid hefty sums to managers despite eroding returns. By some measures, the global hedge fund industry has underperformed broader stock market index returns since the financial crisis. 

In another twist, founding clients of Battlebourne will receive a portion of firm profits, Bloomberg’s review of the documents showed, but they will also have the ability to redeem their capital. 

Goldburg and Scotch reportedly left Silver Lake, the family office of famed investor Michael Milken, in December 2015 and formed Battlebourne in January of this year. 

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