Hedge fund Camulos Capital is offering to slash its fees as it tries to stem a growing wave of investors heading for the exits.
The firm, which has seen its two largest funds fall by about 20% this year, is offering to slash its management fee to 1.25% and halve its performance fee for the next two years if investors agree to a new one-year lockup. Camulos CEO Richard Brennan made the proposal in a letter sent to investors last week.
Investors have made redemption requests totaling almost $350 million of the $1.8 billion in the Camulos Partners and Camulos Partners Offshore funds for Sept. 30. Brennan warned that if clients go through with their withdrawal requests, the corporate credit funds will be forced to sell assets.
“Although relatively few companies in the fund’s portfolio are reporting significant credit deterioration, technical forces in the credit markets have overtaken fundamental values,” Brennan wrote. “Many credit-focused hedge funds have faced significant redemptions or are liquidating, causing them to sell positions also owned” by Camulos, driving down their values.
Under the restructuring proposal, Camulos would cut its management fee from 2% to 1.2% and its performance fee from 20% to 10% from Oct. 1 through 2010. Investors have until Sept. 16 to approve the plan. And although Brennan wrote that Camulos needs 85% participation for the plan to work, he added that the firm might move forward with the restructuring regardless of the outcome.