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From yesterday's WSJ:
Huge Hedge Fund Launched Successfully Under Eric Mindich
By GREGORY ZUCKERMAN and HENNY SENDER
Eric Mindich, a former star trader at Goldman Sachs Group Inc., has succeeded in launching a hedge fund sized at more than $3 billion, one of the largest start-up funds on record.
The success of Mr. Mindich, a former Wall Street boy wonder, is the latest sign that the appetite for hedge funds on the part of large institutions -- like university endowments, pension plans and charities, as well as wealthy investors -- continues to grow.
"This is certainly the largest new fund I've seen in the last 15 years," says James R. Hedges, president of LJH Global Investments LLC, which invests in hedge funds and advises clients. "The largest until now were about $1 billion."
The successful start of the fund, called Eton Park, comes despite heavy fees and other difficult terms for potential investors. For one thing, investors have to tie up their money in the fund for as long as 4½ years to avoid a heavy 6% redemption fee. With his investors' money locked up for years, Mr. Mindich can afford to wait for prime investment opportunities, unlike other hedge funds that face monthly or quarterly redemptions from investors.
Mr. Mindich's investors had to invest at least $5 million to get into the fund, and will pay an annual management fee of 2% to be part of Eton Park, higher than the usual requirements, in addition to handing over 20% of any investment profits.
Goldman Sachs Asset Management, Harvard University, and other large investors put large amounts into the hedge fund.
Sparking the interest is the pedigree of Mr. Mindich, as well as the lackluster investing options currently available. Mr. Mindich started working at Goldman after high school, and spent summers at the firm while earning a degree in economics at Harvard. In 1994, at the age of 27, he became the youngest partner in Goldman's history. He learned the trading business on Goldman's hallowed risk-arbitrage desk. He became a protege of Robert Rubin, the former U.S. Treasury secretary, eventually leading the trading business to record profits. Two years ago, Mr. Mindich became one of Goldman's top executives.
Another reason there has been such excitement surrounding Mr. Mindich is the growing view that stocks and bonds aren't cheap and therefore are unlikely to turn in big gains in coming years, forcing large investors to search for types of investments that can still generate double-digit gains.
In this environment, some funds of hedge funds, which distribute assets across an array of hedge funds, feel they can't afford not to invest in a big new fund like Eton Park; That is because if the new fund takes off, they will look bad.
Mr. Mindich plans to invest as much as 70% of Eton Park's money in traditional equity strategies involving both purchases and "shorting". But given just how much money is now in equity hedge funds, Mr. Mindich has assured his investors that he will range wide to produce big returns, including Latin American, Eastern European and South African markets. Also, as much as 30% of Eton Park's funds may go into less easily tradeable "private" transactions.
Mr. Mindich hasn't managed money for several years, suggesting he may have challenges starting out with a bang. But investors say he has assembled a top-notch team, including Stuart Hendel, formerly a managing director in Morgan Stanley's prime brokerage division, and traders such as Erland Karlsson, formerly of Goldman Sachs in London, Scott Prince, also a former Goldman staffer in charge of equity derivatives and Edward Misrahi, who will have responsibility for emerging market investments at Eton Park and spent 13 years at Goldman.
While few hedge funds have ever started out with nearly as much capital, other funds that split off from existing hedge-fund firms have had problems managing so much money. In 2001, technology specialist Dan Benton left hedge fund Pequot Capital to found Andor Capital Management, taking about $8 billion and a slew of traders with him. At first the fund soared, and Mr. Benton managed as much as $10 billion early last year. But one misplaced bet -- that tech stocks would sink last year -- sparked heavy losses and investor defections.
"Investors are concerned about missing out" on the next great hedge-fund manager, says Mr. Hedges.
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Now to change the subject.
The stock of the day is BEBE stores.
I'm always drooling over the suggestive print ads found in magazines, billboards, and bus stop benches....
MultiQuote
