[credit provider=”Clarkson” url=”http://www.clarkson.edu/news/view.php?id=1492″]
There are new revelations regarding Alphonse “Buddy” Fletcher’s hedge fund Fletcher Asset Management and its claims to investors, according the Wall Street Journal.Pension funds claim that Fletcher promised 12% returns “guaranteed” (the manager says he meant it colloquially, not in the legal definition) and said that its funds could be liquidated within weeks.
The 12% returns panned out, but the pension fund’s requests for redemption were denied.
The fund’s promises to investors were lofty and rare, so it’s not surprising that a probe into the fund is ongoing. For context, consider the background story.
This saga began when Fletcher’s application to buy another apartment was rejected by the board of The Dakota, a swanky Upper West Side residential building.
The hedge fund manager, who had lived in the famed Dakota since 1992, filed a lawsuit claiming he was denied from the co-op because of racial discrimination.
The Dakota’s board, however, said it rejected his application because of financial reasons.
This incident raised concerns about the finances of his hedge fund and even caused the SEC to probe Fletcher’s firm.
Then pension funds who were invested in Fletcher wanted out.
The Firefighters’ Retirement System of Louisiana and two other Louisiana-based pension boards, which all invested $100 million in the fund and were offered a 12% minimum — “guaranteed” — annual return backed by the holdings of other investors, said they all want their money back.
Two of the boards sent partial redemption requests in March, but those requests were denied. Instead, Fletcher issued two-year promissory notes in June.
This did not seem to satisfy the pension funds.
In July, the three pension boards said in a joint statement that because Fletcher didn’t pay out “immediate cash” for their redemption requests “It gives rise to questions regarding the liquidity of the FIA fund and the accuracy of financial statements.”
The pension funds said they’d conduct their own probe into Fletcher.
Now, there’s a DVD video obtained by the Wall Street Journal saying the fund could liquidate investments “in a matter of weeks.”
The video shows Denis Kiely, a director and counsel with Fletcher Asset Management, who describes himself as Fletcher’s “right-hand man and deputy.”
From the WSJ:
The DVD video recording of the investment committee in March 2008 shows a senior Fletcher representative saying the firm’s investments could easily be liquidated.
“When we make an investment, unlike a debt-holder or a real estate holder or a private equity investor, we can liquidate in a matter of weeks,” said Denis Kiely, the Fletcher representative, in the video.
“We can get our capital back…. Everything that we are doing, even if we are buying preferred stock or debt, we want to be able to get our money back in short order.”
Of couse, that doesn’t seem to be the case for the pension boards.
A lawyer for Fletcher, Marc Kasowitz, told the Journal that the Firefighter’s Retirement System’s representatives were “clearly informed” that “there could be liquidity issues based on market conditions at the time of redemption,” the newspaper said.
The story is ongoing.