Lawrence fund manager given second chance

Date: Tuesday, February 3, 2009
Author: Shirley Won, Globe and Mail

Shareholders of Lawrence Partners Fund yesterday voted to let its manager, Ravi Sood, have another crack at reinvesting some of the struggling hedge fund's assets.

Toronto-based Lawrence Asset Management Inc. had been proposing a restructuring for its flagship fund, which lost 81 per cent last year amid the market turmoil. The fund had assets of $43-million at the end of December, compared with $202.5-million a year ago.

More than 90 per cent of shareholders agreed to creating two classes of investments - reinvest and windup shares, said Brian Viveiros, sales manager at Lawrence Asset Management.

He would not disclose the breakdown of the share choices, but sources said about two-thirds of shareholders had opted for the reinvest alternative.

Proceeds from the sales of investments would be redeployed in the fund for those who have chosen the reinvest shares. Those who elect the windup shares will eventually be paid in cash. Shareholders could also elect to get part of their capital back as investments are sold and leave the rest in the fund.

In his recent letter to shareholders, Mr. Sood, president of Lawrence, said the firm and its principals would vote in favour of two share classes and choose the reinvest option.

The reinvest shares will be subject to restrictions. They will not be able to use leverage, but will be able to be sold short. Eligible securities in the fund must be publicly traded on a Canadian stock exchange and have a market capitalization of at least $100-million.

According to the information circular for the shareholder meeting, the Lawrence Partners Fund currently has illiquid holdings in Russian companies. It owns shares in Russo-Forest Corp., set up in 2007 to exploit timber leases in Russia. The fund also lent money to two Russian companies to acquire and develop oil leases.

The management fee will be reduced to 1 per cent on the existing portfolio, but will return to 1.5 per cent on capital that is reinvested. There will be no performance fee on the reinvest shares.

Lawrence Partners Fund suspended redemptions in early November to present alternatives to investors because the fund was left with private investments not easily sold.

In his letter, Mr. Sood said his firm "significantly reduced the value" of several positions in December after reviewing the fund's illiquid investments with its auditor, KPMG LLP.

"Our holdings in Athabasca Oil Sands, Canadian Bioenergy Corp., MagMinerals and Virginia Uranium were written down and represented the bulk of the reduction in net asset value," he wrote.

"We do not expect the market to provide much return to investors in and of itself in 2009, but the current situation has provided an opportunity to buy great companies at great prices."