Atticus Capital closing two hedge funds

Date: Wednesday, August 12, 2009
Author: Reuters.com

Investor Timothy Barakett on Tuesday said Atticus Capital, which suffered some of the hedge fund industry's steepest losses last year, is closing two of its three funds and will return $3 billion to shareholders.

The Atticus founder and chief executive told investors in a letter that he is closing down his flagship fund, Atticus Global, and the $600 million Atticus Trading fund "solely" for personal reasons.

Atticus, the management company, will remain open and led by Barakett, a spokesman said. Atticus partner David Slager intends to continue to manage the $1.2 billion Atticus European Fund.

"After 15 years of being singularly focused on building and managing Atticus, I believe it is time to reassess my future," Barakett, 44, said in the letter, a copy of which was obtained by Reuters.

He said he would pursue philanthropic interests, establish a investment office to manage his own money and form a charitable foundation.

Barakett said the market's recent rally let him begin liquidating "a significant amount of our holdings" and that he expects the Atticus Global portfolio will be fully liquidated by Sept. 30.

About 95 percent of the fund's capital will be returned by early October, with the remainder coming back after a final audit later this year.

Last year's turbulent markets crushed most hedge funds, fueling losses and record investor redemptions. A growing list of fund managers decided to close up shop, in many cases because they face a long climb back to "high water" levels that would let them again earn lucrative incentive fees.

Atticus spokesman Tripp Kyle denies that the firm's closure has anything to do with recent fund performance, redemption pressures or the kind of regulatory scrutiny that prompted Pequot Management to shut down. Barakett was not available for comment.

ACTIVIST

Famed for activist campaigns targeting companies such as Deutsche Boerse (DB1Gn.DE), Atticus managed close to $20 billion by the end of 2007 and generated nearly $7 billion of profit for its investors after starting up with less than $6 million.

Since launching a predecessor to the Atticus Global fund in December 1996, Atticus generated average annual return of 19 percent, after fees, outpacing the 3.9 percent increase in the benchmark Standard & Poor's 500 Index .SPX, Barakett told his investors.

A big winner for Barakett was a 9 percent stake in Phelps Dodge, a mining company that was then bought out by Freeport McMoran. Atticus also reaped gains from a bet on credit-card company MasterCard.

He made headlines in 2005, when Atticus and British activist The Children's Investment Fund pushed for the ouster of Deutsche Boerse's chief executive. Amid a wave of exchange consolidation, the parent of the Frankfurt Stock Exchange made a failed takeover bid for the London Stock Exchange.

Barakett was a star Harvard University hockey player where he scored 79 goals in his senior year and was a teammate of Harbinger Capital's Philip Falcone, today another leading hedge fund manager. Barakett turned down a draft offer from the New Jersey Devils in 1986 and attended Harvard Business School instead.

He started Atticus at the age of 29, teaming up with Nathaniel Rothschild, scion of the famous banking family and the man in line to be the fifth Baron Rothschild.

Barakett reportedly took home between $400 million and $500 million in 2006, according to now-defunct Trader Monthly magazine. A year later, Alpha magazine estimates he walked away with $750 million.

BIG LOSSES

Yet Barakett's style of concentrated bets on stocks, with little hedging, led to massive losses when markets crumbled last year. Atticus Global fund lost 27 percent in 2008, its second down year since inception, and was down 13.3 percent in the 12 months through July.

And while most hedge funds had lousy performance in 2008, funds on average have surged in the first half this year.

Alpha Magazine said Atticus Capital ranked No. 2 on its list of the biggest hedge fund losers last year, as assets under management plunged.

Last September, as markets spiraled out of control and hedge fund firms like Ospraie Fund shut their doors, there was speculation that Atticus was liquidating. Barakett denied the rumor and said it was amassing cash and looking for investment opportunities.

Barakett opened the letter anticipated his decision may have surprised many investors, noting he received redemption requests of less than 5 percent. Recent regulatory filings may have offered a clue that the firm was winding down.

Barakett sold 23 of the 25 U.S. listed stocks it owned during the first quarter, a period when equity markets largely fell.

In a filing Monday, Atticus reported investing more than $3.5 billion in U.S. stocks, including Bank of America Corp (BAC.N).

(Reporting by Joe Giannone. Editing by Robert MacMillan, Bernard Orr)