MD Sass Seeds Emerging Activist Manager

Apr 8 2008 | 2:00am ET

New York-based MD Sass has seeded a hometown activist hedge fund manager and is on the prowl for natural resources and Asia-focused managers.

A source familiar with the deal told FINalternatives that the firm has seeded Richard Rofe’s Arcadia Capital Advisors, which will manage a concentrated portfolio of micro- to small-cap names starting next month. Arcadia was seeded by MD Sass-Macquarie Financial Strategies, the $273 million private equity fund.

The source said the firm put a substantial amount into the operating business and the fund, but declined to specify on the exact amount invested in Arcadia. He said the firm, which is no stranger to the activist space having invested in distressed securities portfolios for the past 20 years, is bullish on Arcadia’s pipeline for deals.

“If you look at the world today, there are a lot of micro-cap and small-cap stocks that have gone down quite a bit even though their operating businesses are doing pretty well,” the source said. “And many of these companies are really of a size where it doesn’t pay for them to be public companies anymore because of the expense of being a public company, particularly the legal and accounting expenses. Therefore, many of these companies should either be the acquirers, be acquired, or go private, and we think we can illuminate those opportunities.”

Prior to launching his maiden hedge fund, Rofe served as an adviser to other activist hedge funds, according to the source.

Going forward, the source said MD Sass is “very interested” in the natural resources space and Asia, including India, “both on the credit and equity side.” The firm last year seeded an Asian equity long/short vehicle investing in Taiwan, Hong Kong and greater China and a natural resources prviate equity fund that makes equity investments in mining concerns in Africa, Asia and Latin America.

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