Goldman Puts the Screws on Whitebox Advisors

Math wizard Andrew Redleaf is like many of the best money managers I have met...eccentric as a bat. God bless him and his description, completely taken out of context, of how hedge funds should advertise if they were allowed to, which is one of his many beefs:

Another pet peeve is the media’s use of “lightly regulated” and “highly leveraged” to describe hedge funds, which Mr. Redleaf says are “differently” regulated. For example, hedge funds cannot advertise like mutual funds. “If we could, the advertisement would not be grandpa fishing with his grandson,” he says dismissively. It would probably be whale harpooning or bear tackling. New York Times

Jenny Anderson’s piece on Redleaf might the best she has ever published; hit the link below to get a taste of Redleaf’s humor. But he has mounting problems, and is the latest example of prime brokers putting the squeeze on their clients.

Certainly we don’t know the full details, but it appears Whitebox’s convertible arbitrage fund run by Robert Vogel is in a tight spot, no doubt exacerbated by Goldman Sachs, their prime broker:

Hedge fund manager Whitebox Advisors won’t let customers cash out, according to a national publication that follows the lightly regulated industry that manages money for affluent individuals and institutions.

The publication, which circulates among investment managers, said Goldman Sachs put Whitebox in a box earlier this month by requiring that the firm double the amount of collateral it puts up against margin loans used to trade convertible bonds. That puts Whitebox in a temporary squeeze because it must put up more of its own capital and devalued holdings against its margin accounts, which are trading accounts that use borrowed money in part to invest.  Minneapolis Star Tribune

But I will take Whitebox over Goldman any day. And leave you with Andy’s thoughts:

A common theme, and one of Mr. Redleaf’s pet peeves, is the idea that fiduciaries, those entrusted with acting in the best interests of their clients, have abdicated their obligations. It is a sentiment that segues well into hedge fund investing. “Good hedge fund managers expose and defy convention, taking all personal and business risks entailed in such defiance to build truly conservative portfolios,” he wrote in a letter. “In large part this consists in arbitraging the laziness, ignorance, careerism, conformism, cowardice and dissimulation of supposed fiduciaries.”

Amen, Andy. And please give one of those big banks a call. They would be happy to take your business, although with regulators putting heat on prime brokers to put heat on hedge funds, maybe there is no running from Paulson and his cronies.

Whitebox hedge fund puts halt to cashing out
Star-Tribune

A Hedge Fund That Saw What Was Coming
New York Times
__________________________________________________________________________

The one of the more awkward interviews I have ever seen on CNBC, taped rougly a year ago.

October 3rd, 2007

--------------------------------------------------------------------------------------------------------------
The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position

Comments:

<< Back to main