Absolute Capital Halts Redemptions After Homm Quits (Update3)
By Edward Evans
Sept. 19 (Bloomberg) -- Absolute Capital Management Holdings Ltd. will stop clients from pulling money from eight hedge funds with $2.1 billion of assets after co-founder Florian Homm quit.
Investors will be asked not to remove cash for a year as the firm restructures the funds, Absolute Capital said in a statement today. Seven of the pools invested in over-the-counter U.S. stocks that can't be sold at the prices at which the firm had valued them, affecting as much as $530 million of assets.
Absolute Capital clients tried to withdraw more than $100 million after Homm quit yesterday in a dispute over pay for the firm's fund managers. Homm, 47, managed three of the funds affected, and oversaw the others as co-chief investment officer. Shares of the company, which has its main offices in Majorca, Spain, have slumped 83 percent since Homm announced his departure.
``The proposed restructuring of the equity funds and the imposition of the lock in period will provide stability to its equity fund business,'' Absolute Capital said in the statement. ``The company has held discussions with large fund investors, who have indicated their preliminary support for the proposal.''
Absolute Capital shares slid 50.5 pence, or 43 percent, to 68 pence ($1.36) at 10:30 a.m. in London, valuing the hedge-fund company at 44 million pounds. The stock fell 70 percent yesterday.
Discord Over Pay
Homm said yesterday he left after a disagreement about pay for top fund managers and whether executives should follow his lead in turning down bonuses and contributing shares to support the funds during market turmoil. Absolute said today it approved the bonuses Homm recommended.
Homm didn't answer calls to his mobile phone, and Chief Executive Officer Jonathan Treacher didn't immediately return calls to his office and mobile phone.
In an interview yesterday, Treacher said he was ``surprised'' by Homm's departure. ``We never discussed him resigning,'' he said.
Under the proposed reorganization, the illiquid positions will be transferred to a new fund in which investors will get separate shares. Absolute will hire external advisers to value the illiquid assets before selling them, the company added. The other shares would track the liquid portfolio.
Homm and former Chairman Sean Ewing, 42, founded Absolute Capital and sold shares to the public last year. In an open letter to shareholders yesterday, Homm said he doesn't intend to start another fund to compete with Absolute Capital and that he remains the largest shareholder.
Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
To contact the reporter on this story: Edward Evans in London at at eevans3@bloomberg.net
Last Updated: September 19, 2007 05:45 EDT |
