Money managers under the microscope
You’ve got to hand it to Cerberus.
While we dutifully write stories about a new beginning for the hedge fund industry, marked by transparency at levels never seen before and fund structures designed to satisfy those burned by the credit crisis, the firm named after the guard dog at the gates of Hades comes up with its own tactic — lock up investor money for three years.
You might think that this is the last thing investors want, but it has a curious logic.
The biggest complaint about the widespread lock-ups in the hedge fund industry over the last 12 months was the arbitrary nature of them. Just when clients thought ‘phew, at least I can pull my money out of XX fund’, they found the gate slammed shut on them.
With Cerberus’s new model though, investors will have comforting certainty about the status of their money at the firm’s hedge funds, and know that they’ll need to plunder other sources for cash should the need arise again. We’ll have to wait and see if others follow suit, but a widespread adoption of three-year lock-ups could give investors pause for thought and slow the recovery of the industry’s asset building.
Embattled Cerberus Capital Management, a private-equity firm named for the mythological three-headed dog that guards the gates of Hades, has been overwhelmed by clients seeking to withdraw money from its $2 billion hedge fund, Cerberus Partners.
Website FINAlternatives said that fund investors representing 17 percent of the assets wanted to withdraw their money in December, the most recent month for which statistics are available. Now, with Cerberus’s investments in Chrysler and GMAC going bad and unemployed investors needing to tap more funds, that figure may be heading higher.