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Tisbury Capital - M&A, event driven

2008-03-31

Count of distinct funds: 1
Capital base: $2B
Loss: ?

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stories: ft.com

The FT confirms what we had been hearing about Tisbury being under distress:

Investors in Tisbury Capital are trying to withdraw $1.4bn of the London hedge fund’s $2bn of assets under management after the fund abandoned an ill-fated US venture. The scale of the withdrawals will end Tisbury’s reputation as one of London’s bigger merger arbitrageurs. Tisbury, run by former Citadel trader Gerard Griffin, has broken with hedge fund convention by dropping a 10% cap on withdrawals to allow investors to get their money back quickly, as long as they agree to retain their share of $300m of hard-to-sell assets.

Interestingly, a source sent us volumnous information about Tisbury in early March which we could not confirm. The extent of the withdrawal requests seems spot on, however, the "office politics" aspects may or may not be true:

Tisbury Capital is in danger of imploding. After a period or almost 8 months of under performing and losses investors have lost patience and have made notification for redemptions for nearly half the $2bn invested for a March withdrawal. Further notices have been made for June withdrawal and these are rumoured to take the fund from a peak of $2.4bn down to around $0.5bn.

The problems started as key personnel started to leave Tisbury, Anna McCutcheon, Emanule Minotti, Stephane Carnot and Adrian "Dr" Fox-Murphy. This left Gerard Griffin alone to manage the fund through the turbulent times. The fund took some big losses after the departures in stocks such as ABN Amro, RBS and Clearwater and the fund increased its turnover as it chased bigger and riskier bets. Through these times investors found it difficult to get through the Gerard Griffin and felt ignored building distrust. It is understood that his style is officially risk arbitration and event driven, but increasingly became day trading and betting, with little attentions paid to his analyst. The year finished down 3% after peaking in May at about 11% up, a dismal –14% H2 performance.

In January Tisbury suddenly closed the Boston Office making all the employees there redundant, it also made 4 redundancies in the London office after the fund had one of its if not the worst month in history losing 687bps. This was the final straw for us investors and the redemptions grew to preserve some the investment before the fund implodes.

The rumour is that main partner and fund manager Gerard Griffin is trying to save face before Tisbury's eventual implosion and looking to sell the funds under management on. It appears that GLG will be acquiring the fund and taking Gerard Griffin into their system.

It will be interesting to see how Gerard Griffin copes when there is someone monitoring and realising his true investment style and how long he continues managing the funds he has rumoured to sell to GLG. GLG is expected to announce the purchase this coming week.

Of course much of this information is hearsay (and we did not find any confirmation of a looming GLG buyout), but it looks pretty accurate to us. The source provided some further details:

The fund's strategy is event driven.

There is just the one fund of Tisbury, the other funds are simply sub funds categorised by investor type, the performance and investments are in the single main fund. The redemptions are large enough, ie could reduce the fund to around $600m and with Tisbury's overheads and new office in Old Burlington Street, the economic viability of continuing will be questioned.

I think Anna left around June 2007. Stephane left shortly after and was reported in the FT as Stephane was under FSA investigation. The risk control person Adrian Fox, left in Autumn and Emanuele left around the same time. The Boston office closure was reported in the FT on Feb 11th 2008.

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Important: This fund is on our list of hedge funds that are apparently ailing or which we think are worth watching for any other reason. Ailing funds haven't shut down, but they've suffered significant value declines and/or temporarily halted redemptions. Funds on watch may not even have unusual declines, but may be posted if it is felt there may be risk of developing a more serious condition eventually.