Falcone’s Partners Master Fund Said to Limit Client Withdrawals
By Katherine Burton and Saijel Kishan
Dec. 24 (Bloomberg) -- Harbinger Capital Partners, the investment firm run by Philip Falcone, will limit year-end withdrawals from its biggest hedge fund to 60 percent to 70 percent of the $3.5 billion requested by clients, according to people familiar with the matter.
The $10 billion Harbinger Capital Partners Master Fund tumbled 23 percent this year through November, after being up 43 percent as of June 30, said the people, who asked not to be identified because the information is private. New York-based Harbinger will put the fund’s private-equity holdings, about 15 investments, in a side-pocket, or segregated account, so they don’t have to be sold at distressed prices.
“Managers are with greater frequency employing tools, including side-pockets” and the suspension of withdrawals, “as methods of providing for orderly redemptions,” said Ron Geffner, who represents hedge funds at the New York-based law firm Sadis & Goldberg LLP.
Hedge funds, reeling from the worst financial crisis since the 1930s, may face investor withdrawals of as much as $400 billion this year, according to estimates by Morgan Stanley. The industry could start 2009 with about $1.1 trillion in assets, down from $1.9 trillion as recently as June 30.
Charles Zehren, a spokesman for Harbinger, declined to comment.
Funds have been limiting client withdrawals in record numbers. As many as 80 funds have restricted redemptions, known as putting up gates, or segregated assets following stock-market declines and a credit freeze that started with rising defaults on U.S. subprime mortgages.
Hedge-fund firms including Tudor Investment Corp. and Citadel Investment Group LLC have suspended all redemptions.
Falcone, 46, invests in companies going through events like mergers and spinoffs. He started the Capital Partners fund in June 2001, and last year it returned about 115 percent. Until 2008, the fund had never posted a losing year.
The firm will notify investors by Dec. 31 of the exact percentage of redemption requests they will receive. They won’t be charged fees on the side-pocket.
