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US hedge fund Harbinger swings to gains

Date: Tuesday, April 7, 2009
Author: Svea Herbst-Bayliss, Reuters

Hedge fund firm Harbinger Capital Partners LLC swung into the black with investors saying the flagship fund gained between 6 and 8 percent in the first quarter.

That is good news for the New York-based firm, run by Philip Falcone, and its clients after Harbinger Capital Partners Fund I lost roughly 28 percent last year.

That is more than the average hedge fund portfolio's roughly 19 percent loss, but less than the Standard & Poor's 500 Index 38.48 percent drop.

For Harbinger, which had posted gains every year until 2008, the drop stands in sharp contrast with the fund's 116.1 percent gain in 2007 and its 20 percent annualized return since the fund was launched in 2001.

The performance numbers coincide with other changes at the fund firm this spring.

Shareholders agreed on new redemption guidelines that will help preserve capital and allow managers to invest in credit markets during the current distressed cycle.

Falcone is also starting a fund to buy credit-default swaps and bonds.

Many investors punished hedge funds for their worst-ever returns and demanded their money back last year. Harbinger structured withdrawals to include cash and private equity holdings.

Also this week Peter Jenson started work as Harbinger's chief operating officer where he is to build an institutional infrastructure at the $7 billion (4.69 billion pounds) fund firm, according to sources not authorized to talk about the matter publicly. Jenson previously worked as controller at Chicago-based Citadel Investment Group LLC.

There will be no change to Harbinger's roughly 25-person investment team, the sources said.

Jenson was brought on after Harbinger severed its ties with Harbert Management Corp earlier this year. Harbert had helped Falcone get started in the business.

Charles Zehren, a spokesman for Harbinger, declined to comment on the changes.

Some investors described the split as amicable and aimed at consolidating Harbinger's operations in New York.