Lehman Vet’s Hedge Fund Burned By Asset Freeze

Dec 17 2008 | 1:47am ET

A former Lehman Brothers trader is reaping what his old firm sowed at his new hedge fund, which was seeded by Lehman.

R3 Capital Management has lost 31% in the six months since it was founded. But the $1.5 billion fund’s investment losses are just 10%; the rest of decline stems from the Lehman bankruptcy and the freezing of the collapsed bank’s prime brokerage assets, Bloomberg News reports.

Former Lehman global principal strategies group head Rick Rieder set up R3 earlier this year. The nascent hedge fund enjoyed the backing of Rieder’s former employer, with Lehman providing a $1.1 billion seed investment and taking a 45% stake in R3. Lehman also sold the hedge fund a $4.5 billion loan portfolio.

Lehman sold its 45% stake in R3 in October, after filing for bankruptcy. But it also added $250 million to its investment in the R3 Capital Partners Master Fund.

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