Soros, Millennium Vets Debut Multi-Strat Fund

Mar 2 2009 | 9:54am ET

New York-based Logik Asset Management recently launched a multi-strategy hedge fund to invest in event driven, merger arbitrage and special purpose acquisition corporations (SPACs).

The Logik Event Fund began trading in September and returned 4% in its first quarter and over 5% in January.

The fund is the brainchild of Douglas Schultz and Daniel Hess, formerly of Soros Fund Management and Millennium Partners, respectively. In early 2007, the pair partnered with Coast Asset Management to manage a portion of an in-house multi-strategy fund. They also managed a dedicated event driven fund for the firm. Last year the two spun off from Coast—with the firm’s blessing, and its backing—to launch their own hedge fund.

The pair shunned most event driven situations and SPACs during 2007 and the first three quarters of 2008.

“We stayed away from SPACs because none of the prices made sense to us until
we got to the end of September when we started seeing the forced selling by hedge funds,” Schultz said. “The yield to worst went from between 3% and 4% to 10% and 15%, annualized. Our portfolio became heavily weighted towards SPACs and we took leverage up as a result.”

“As we got into late December, this asset class began to rally and the yield to worst began slipping back into single digits. The reason why we made so much money in January is because these SPAC positions went up significantly in value as the yield to the worst liquidations declined. We’ve since reduced our exposure by about 60%.”

Going forward, Schultz said he sees a lot less competition in the merger arbitrage space. He also thinks that volatility in the marketplace will decline in the next three months, and he anticipates that the fund will make money in hostile bids from strategic buyers, company auctions and activist situations.

The $12.5 million Logik Event Fund charges a 1.5% management fee and a 20% incentive fee with a $250,000 minimum investment requirement.

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