Sandra Manzke: Hedgistan is Cutting its Own Throat

Sandra Manzke left her lucrative job at Rogers, Casey long ago, before I had ever heard of the firm. Yes, she has been around the block, and her consulting work predates many of the lemming fund of fund types and other Johnny come lately's in the asset management and alternative business.

Her letter stirred the pot, and is being compared to the letter Jerry Maguire wrote in the movie of the same name. Of course, this time its for real.

And Hedgistan needs to get real. Most of the gates and side pockets are a joke, despite the protestations to the contrary.

MAXAM Capital Management LLC
RE: AN IMPORTANT LETTER TO HEDGE FUND INVESTORS
Dear Sir/Madam:

I was one of the earliest investors in hedge funds. I made my first investment in 1985 when the industry was exclusive to the United States and there were only 68 funds in existence. As such, I have watched the industry grow from a small private investment club to its current state managing in excess of a trillion dollars with more than 10,000 funds. I was an early proponent of the fund of funds business which enabled smaller investors the ability to access the talent pool, and gain diversification with lower minimum investment. I once was proud of the industry, now I am very concerned.

While we all recognize the difficulties of the current market environment, I am appalled and disgusted by the activities of a number of hedge fund managers. The increased use of gating, side pocketing, suspension of redemptions, failure to post an NAV, fund liquidations that favor management are just a few of activities that are giving this industry a bad name. Worse, there are managers who are attempting to get their money out ahead of investors, attempts to eliminate high water marks, asking investors to increase fees to pay for fund expenses, receiving fees on liquidating funds, receiving fees on illiquid securities, and mispricing their books.

We have seen funds which claimed to have no leverage, in fact, facing margin calls that wipe out capital. And managers who have received millions of dollars in incentive fees, walking away and leaving investors with nothing. Further, management fees have crept up to outrageous levels and hedge fund organizations are paying employees lucrative wages, while investors are bearing these costs, unjustified by mounting losses.

I was in favor of SEC registration and oversight and 2008 is certainly a poster child for the need for better regulation. Now, I feel that investors need to form an organization to protect against the egregious hedge fund manager. Hedge fund managers do not disclose their investors and we are each operating in a vacuum. We should be able to unite to change how this industry operates. I am proposing that we form the “Hedge Fund Investors United Forum” to propose reform in the industry that would protect our clients’ and our own interests.

Carl Icahn has started his shareholders group to change the behavior of corporate America. I urge everyone to go to his blog and join, because corporate America has lost its way. Corporate management needs to get back to running companies to make money for shareholders, not for personal gain. We need to get hedge fund managers to work for their investors and not for their personal gain.

As a group we can influence the future of the industry. We can start to define neutrally beneficial terms, not punitive investor terms. If we want to survive, we have to restore confidence and reshape the industry. I am not saying everyone out there is a bad apple, but there are too many bad apples for my taste and it only takes a few to bring the industry to its knees.

If you are interested in joining with me to bring reform to this industry, please email me and together we can start the process.

With great concern,
Sandra L. Manzke
Chief Executive Officer
__________________________________________________

SUMMARY OF HEDGE FUND GATES, RESTRUCTURING AND NAV SUSPENSION - NOVEMBER 2008
Castle Hall Alternatives

Manzke ‘Disgusted’ by Hedge Funds, Seeks Investor-Rights Group
Bloomberg

Previously
The Gates Go Up in Hedgistan
1440 Wall Street

___________________________________________________________________

Sandra Manzke, Chairman and Chief Executive Officer, founded MAXAM Capital in April 2005. Prior to that, Sandra was the founder and co-CEO of Tremont Capital Management. She was responsible for the oversight of Tremont’s operations and the development of Tremont’s business plan. She was also a member of the Investment Advisory Board. Sandra oversaw the creation and sale of Tremont’s life insurance products, which were the first to use hedge fund investments.

Prior to the formation of Tremont, Sandra was a principal at Rogers, Casey & Barksdale, Inc., a pension fund consulting firm, from 1976 to 1984. While there, she served as the senior consultant to a number of major corporate/ERISA clients. From 1974 to 1976, she worked as an independent consultant at Bernstein Macauley where she was responsible for reviewing the firm’s investment products. She was at Scudder Stevens & Clark from 1969 to 1974, where she established one of their internal measurement systems during her tenure as an Investment Manager.

Sandra has extensive experience in designing and implementing multi-manager, multi-asset class investment programs. She has broad experience in all aspects of pension fund consulting, manager research, performance measurement, and program administration. Out of this expertise, she formed the Minority Equity Trust, a program that focuses on minority and women-owned investment managers. Sandra was instrumental in Tremont becoming the first major consulting firm to focus on hedge fund managers, making its first investment almost twenty years ago. Creative and innovative solutions to financial needs are among her strengths.

Sandra holds a Bachelor of Fine Arts degree from Pratt.
-----------------------------------------------------------------------------------------------------------------------
The content contained in this blog represents the opinions of underthecounter. 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.

Comments:

<< Back to main