Was Barakett pushed out of Atticus Capital?
By Teri Buhl for Hf-Implode
Activist hedge fund manager Tim Barakett announced he's throwing in the towel today and shutting down what's left of his Atticus Global fund.
Barakett states in his letter to investors that he is leaving to spend more time with family and work on philanthropic ventures. Yet, investors in the fund tell us there is another reason for the split. According to two fund-of-funds investors, Barakett and his partner David Slager began fighting over investment strategies last summer. The tussle began when Barakett set up a side-pocket fund for Atticus' investment in Deutsche Boerse, a move investors didn't vote on nor from which did they have the ability to redeem. That caused one fund-of-funds investor to pull his firm's large investment out last fall and warn others he didn't think Barakett could turn his lagging fund around.
"Once I saw the in-fighting between management [Barakett & Slager] over investment strategies, I knew it was time to get out," said the investor -- who had entered the fund on the recommendation of Atticus board member Nat Rothschild. "Luckily, I was an earlier investor and didn't have a long lock-up. Others were not so lucky." (Rothschild was a seed investor in Atticus, helping Barakett and Slager get their start. He continued to sit on their investment advisor board as they grew to a $20 billion fund.)
Atticus' outside press firm, New York-based Finsbury Group, flat-out denied the in-fighting news. Finsbury also denied liquidation rumors that have clearly come true now.
The investor's response to the denial was, "Of course they are going lie to the press about it. They have to or they could really have a wide-spread investor panic on their hands." News of Atticus' internal turmoil never made it to press last fall.
But warning signs of trouble in Barakett's fund continued, as fractures between the investing duo could be seen in Slager's January 26, 2009 letter to investors in his Atticus European Fund.
Slager wrote at the time, "As the Portfolio Manager and largest investor in the European Fund, I remain fully committed to the European Fund and its strategy. While I cannot speak for the other partners and employees of Atticus, each of whom is free to make their own decision, I do not intend to redeem any of my capital. I also remain committed to managing the European Fund for all current investors who desire to continue to invest along side me."
In early June, Market Folly was one of the first to warn of massive position liquidations after a review of the firm's 13-F filings for the first quarter.
Barakett writes in his investor letter today that redemptions for his fund over its lifetime were less than 5 percent and were not the reason for his departure. But investors in the fund we spoke with today are laughing at that statement. According to them, Barakett can claim actual redemptions were low only because he had them in a three to four year lock up -- they tried to get out but he wouldn't let them. Considering the firm was one of the biggest asset decliners among hedge funds last year – losing 60 percent year over year – it's likely there wasn't a lot of extra cash floating around to redeem anyway. Atticus Global went from $8.5bn of assets in the beginning of 2008 to only $3.5 billion today. It earned a negative 27 percent last year, with fees of 2 & 20. Fund investors believe Barakett personally took a dent to his wallet because so much of his own money is invested in the fund. Yet, those close to Barakett say that since he became a billionaire in 2008, getting out now wouldn't risk sending him to the poor house.
Slager will continue to run his European fund that which now has only $1.2 billion in assets. Contrary to Barakett, he's anxious to tap the distressed assets market and excited to stay in the game running what's left of the firm.
Slager told his European Fund investors earlier this year, "...I believe it is now possible to buy enduring businesses at very depressed valuations. The economy should recover in the next 12-18 months and the equity market should start to recover ahead of this."
Who knows – after he clears his high water mark, he might actually see some more coin for himself – and maybe finally earn an incentive fee in 2011.
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