Thursday, 9 July 2009

Cerberus never sought out deals which would attract bad publicity

The New York Times has the following story regarding the troubles being faced by the previously omnivorous Cerberus fund that never saw a deal that it didn't want to have a look at.
Cerberus Capital Management, the secretive investment firm run by Stephen A. Feinberg, is restructuring amid a wave of requests from clients who want their money back.

But, like many hedge funds that have been hit with losses, Cerberus is not allowing investors to pull their cash from the fund just yet. Investors who have submitted redemption requests will have their assets moved into a new fund that will be liquidated as market conditions improve, Mr. Feinberg said in letter to clients last Friday. Investors in the new vehicle have been told they will not pay management fees, one investor said.

Those investors who want to stick with Cerberus will also see their assets moved into a new fund with reduced fees. The firm’s main hedge fund lost 24.5 percent last year and has dropped an additional 3 percent through May 31.

“We are embarrassed and disappointed by our 2008 performance, and we feel an obligation to you to turn this around,” Mr. Feinberg said in the letter. “But we just don’t know when and how much pain we must take before that happens.”

His comments differ markedly from his confident tone last September when he told investors that, “none of our problem positions are large enough to create a real return problem for the fund.”

Those “problem positions” included high-profile bets on Chrysler, GMAC and the residential mortgage company, ResCap.
The most amusing part of what is a sad story - at least for those investors who would like to exit the fund sooner rather than later - was Mr. Feinberg's remark, in a letter to the unhappy fund participants, that “we never intended to receive the publicity surrounding those investments,”

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