Taking a flight to Jo-burg this week? Then you might have time to read Portfolio’s latest expose: a book-length “peek inside” a hedge-fund called Cerberus. If/when you get through it, please tell us how it was.
Working away like most mortals in cubicles? Then let us save you the time. The magazine’s promo suggests that the Portoflio story traffics in every headline-grabbing hedge-fund cliche in the book. Namely:
Doesn’t anyone ever get tired of these stories? Here’s what hedge funds are really like: Every office you’ve ever worked in: all the petty politics, all the b.s., all the water cooler chatter, all the incompetence, arrogance, and occasional brilliance. The only difference is that everyone takes home at least $10 million a year. (Think that’s a big difference? Not in terms of how fascinating the characters are.)
SAI’s Peter Kafka says that Dan Roth is an excellent writer and that the story is probably great. So perhaps it’s just the hackneyed PR spin. In any case, the only real news here is that Portfolio’s second issue is hitting the stands, and the magazine’s management is in turmoil. But here’s the shock-your-pants-off promo:
THE MOST DANGEROUS DEAL IN AMERICA
In the September 2007 issue of Condé Nast Portfolio, senior writer Daniel Roth goes inside the secretive world of Cerberus Capital Management, the $26 billion investment firm run by famously elusive C.E.O. Steve Feinberg, and reveals why its 100-day plan to save Chrysler terrifies Wall Street (“The Most Dangerous Deal in America,” p. 192). Roth reports that Feinberg, who has never given an interview or been photographed by the press, recently summed up his company’s philosophy: Reveal as little as necessary, be anonymous, be invisible. “We try to hide religiously,” Feinberg told a group of investors. “If anyone at Cerberus has his picture in the paper and a picture of his apartment, we will do more than fire that person. We will kill him. The jail sentence will be worth it.” Cerberus insiders describe the company’s intensity (a former employee refers to headquarters as the Death Star) and lack of hierarchy as an extension of Feinberg’s personality, which Roth notes is “pathologically self-effacing.” For the first time, Roth details how Cerberus has performed—its collection of companies would form the ninth-largest business in the U.S., with sales greater than those of Pfizer, Microsoft, and United Airlines combined—and explains its strategies, which have produced outsize returns and consistently beat the performance of rival funds. Roth writes, “Feinberg won’t be able to escape the spotlight as he tries to save Chrysler. This will be his riskiest, most public buyout.” Roth reports that even before the deal closed, it sent the market careening, and in July, normally pro-risk hedge funds and other investors refused to buy $20 billion in Chrysler debt, the biggest warning sign that the buyout boom may have ended. “Cerberus is not really staking its financial health on turning Chrysler around. It’s that its reputation is at risk,” says a hedge fund manager. Feinberg is also being monitored by Washington, with Congress eager to see what he is going to do with—or to—Chrysler’s nearly 80,000 workers, most of whom are in the political-battleground states of Michigan and Ohio. Feinberg knows he has to convince people that Cerberus’ intentions are honorable, even as workers at Chrysler remain sceptical that Cerberus won’t “strip and flip” their company. Feinberg’s low profile could protect him from the gathering storm of populist sentiment, Roth notes, reporting how, two days after closing the deal, Feinberg tapped a controversial outsider, Bob Nardelli, to be C.E.O. of Chrysler. “Carl Icahn works through the public media when he’s doing deals,” says a former Cerberus executive. “Other guys want that same attention. Steve Feinberg doesn’t. He has a very clear scorecard. And he’s winning.”