Dealbreaker

So okay, Absolute Capital’s insane manager Florian Homm abruptly resigned on Tuesday. Okay, the shocking departure caused investors to pull more than $100 million, in turn revealing that the positions were illiquid. Okay, Ab-Cap was then forced to halt redemptions for a year, causing stock to drop an impressive 90% this month. Are those reasons for the AIM-listed hedge fund to not ask investors if it’s okay to reset performance fees so it can continue to earn income while it attempts to wind down nearly $530 million in undisclosed holdings in illiquid shares of US companies? If you answered ‘No,’ you’re in good company with Absolute, who sees no problem with slapping people in the face, either.

Chief executive Jonathan Treacher said yesterday that he will be asking permission of investors in five of AC’s eight equity funds to agree to split off the illiquid holdings, “leaving a rump fund that would be locked up for a year,” and requesting a reset of the base for calculating performance fees, so they can continue to do stellar work. Unless two-thirds of the investors say “Sure, light more of our money on fire,” liquidation will likely follow, the company said.

Do you think even Tom Hudson would have the pair to make such a request? If he had any investors left to ask, probably yes!

AbCap to reset performance fees [Financial Times]
Absolutely Ridiculous [Breaking Views]