NIR Sees ‘More Than Normal’ Redemptions, Restructures Funds

Oct 22 2008 | 1:43am ET

New York-based NIR Group, a $7 billion alternatives finance shop, is restructuring its AJW family of funds following a wave of redemptions.

A source told FINalternatives that the firm’s AJW funds, which focus on small- and micro-cap companies’ convertible securities, “are seeing very significant redemptions,” forcing the firm to restructure the funds “immediately.” Investors are being offered either a three-year lockup or a quarterly redemption system with 90 days’ notice, although the latter allows clients to withdraw just one-eighth of their holdings per quarter. In return, NIR is slashing fees from 2% for management and 20% for performance to 1% and 15%, respectively.

NIR said in a statement that the move was necessary to protect the capital of all investors.

“Recently, due to circumstances outside its control, The NIR Group elected to restructure several of its hedge funds, the AJW Family of Funds,” the firm said.

“The funds, which specialize in asset-based investment structures, have received more than normal redemption requests from investors who need to meet liquidity calls of their own. The proposal seeks the commitment of investors’ capital in two new structures for longer terms and includes reduced fees for NIR Group. The background to the new structure proposal is due to the recent market turmoil and poor liquidity of the investors themselves in the AJW funds. These redemptions are not in any way tied to poor performance.” 

NIR said the AJW funds are up 8% or more year-to-date, following a 1% gain in September, one of the worst months in the history of the hedge fund industry.
Despite the troubles in the AJW family, NIR announced this week plans for a loan fund focused on public mid-cap concerns.

“We do see the need in the direct investment space with the spigot turned off in terms of underwriting and credit on the Street to middle-market companies that are in need of expansion capital,” said Corey Ribotsky, the managing member of NIR.

The Haverstock Fund’s typical deal size will be between $15 million to $35 million, and NIR is looking to hold a first close of the fund at $500 million. Ribotsky said the fund is “pretty liquid” with different fees and redemption structures, and there is also an option for investors to be locked in for a longer period in exchange for a reduction in fees.

Ribotsky also mentioned that the firm is prepping a distressed credit fund to launch within the next few months.

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