Photo: The Deal Sleuth
The Wall Street Journal reports that Goldman Sachs clients are among those impacted by Eddie Lampert’s plummeting investment in Sears.The reason?
An exclusive deal that allowed Goldman clients, including pension funds and endowments to invest approximately $3.5 billion in Lampert hedge fund.
The transaction took place in 2007, at the height of the hedge fund and financial bubble.
Goldman made a reported $75 million in fees from the transaction, or about 2% of total funds raised. It then invested these proceeds into the fund alongside its clients.
Goldman’s clients were flattered flattered to have exclusive access to a fund manager with previously spectacular returns and a growing reputation as the ‘next Warren Buffett.’
Lampert was glad to spare himself months criss-crossing the globe meeting with investors to raise that capital.
Now, things are looking less than rosy. Sears stock, one of Lampert’s funds main holdings, was down 57% in 2011, although it has recovered some in 2012.
As the WSJ’s David Benoit separately notes, Sears (ticker: SHLD), has had a good 2012:
Today, at least, the tear continues. Sears is up 7.5%, at $52.50, with no news so to speak, and has now risen 66% this year, by far the best stock in the S&P 500.
Still, the terms of fund lock investors cash into the fund until the end of 2012 and as the WSJ notes, “some analysts are sceptical about whether the recent gains [in Sear’s share price] will last.”
And overall, the returns of the investment four years later appear paltry: “overall, the Goldman clients are up less than 1%, as of the end of trading on Friday, according to people familiar with terms of the deal.”