Harbinger’s Flagship Bounces Back

Apr 6 2009 | 2:05am ET

While some Harbinger Capital Partners investors are angry about the firm’s plans to launch a new distressed credit hedge fund, they should all be happy with its flagship fund’s performance in the first quarter.

Harbinger Capital Partners Fund I, which lost 28% last year, rose between 6% and 8% in the first three months of 2009, Reuters reports. Last year’s decline was the first ever by the New York firm. Harbinger I has some $5 billion in assets.

Last month, Harbinger chief Philip Falcone announced plans to launch a new fund that would use a strategy similar to that run by Harbinger I from 2001 until 2004, when the flagship enjoyed 22% annualized returns. Some investors are crying foul.

“We hired Falcone because he was the best distressed investor on the planet, and then he morphed into an equity manager who took big bets with an activist bent,” Brad Alford of Alpha Capital Management told Bloomberg News. “Now, he decided to launch a credit fund while 35% of our capital is stuck in private equity.”

Falcone said that Harbinger I will return to its roots, making the same investments as the new Credit Distressed Blue Line Fund. But the flagship will maintain a more diversified portfolio, continuing to invest in stocks and private equity.

Separately, Peter Jenson has joined the hedge fund as chief operating officer. The former Citadel Investment Group controller is charged with building an institutional infrastructure at Harbinger.

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