Looking back at Falcone’s fall to earth and von Mueffling’s dead health care fund

November 09, 2010   Lawrence Delevingne


In this week’s look back at the archives, AR revisits Harbinger’s private equity-like bets, the Cioffi/Tannin verdict, a Tiger cub launch, and Cantillon’s ill-fated health care fund.

One Year Ago
»» Investors questioned Harbinger Capital Management in an ASBPE award-winning AR cover story, “Phil Falcone's fall to earth.”

According to the introduction, “A wildly successful bet on subprime mortgages put Harbinger on the map, but big losses last year are forcing Phil Falcone to rebuild.” Harbinger placed more than a third of its investments in a side pocket, which clients bemoaned because of a concentration in a handful of positions, which seemed more like private equity and activist plays.

Many of the same issues remain, mainly from difficult-to-value, illiquid telecom and cellular positions that make up much of Harbinger’s flagship fund. Overall, Harbinger manages $9 billion, down from a peak of $24 billion in 2008.

»» A jury in Federal District Court in Brooklyn concluded that former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin did not lie to investors when they presented an upbeat assessment of their hedge funds even as the funds they managed were plummeting in value. Cioffi was also found not guilty of insider trading charges.

Today, Cioffi is quietly managed his own money and plans to move to Florida, according to the New York Observer. The SEC’s civil case continues against both Tannin and Cioffi.

Five Years Ago
»» Brett Barakett's then-$4 billion Tremblant Capital Management prepared to launch a telecommunications and media long/short equity fund run by Tiger cub Mark Beder. The new fund, Tremblant-Trident Partners, was New York-based Tremblant's fifth launch.

Today, Tiger alums don’t have the same buzz. AR’s November cover story, Are the Tigers losing their stripes?, explains that about 100 funds claim kinship with Julian Robertson, but the DNA is running thin at a time when the patriarch is trying to raise money.

»» Cantillon Capital Management, the New York-based hedge fund group headed by William von Mueffling, added another strategy to its then high-performing range of products with a global health care sector fund. Long/short Cantillon Health, managed by Santtu Seppala, launched quietly in September 2005 and soon managed some $120 million.

The fund grew to $350 million and generated an annualized return of 7.32% during its lifetime, but closed in 2007 due to a lack of shorting opportunities.

By June 2009, von Mueffling closed all Cantillon hedge funds—returning $3.5 billion to investors—and went long only. The bet reportedly paid off: The fund is up 21% in 2010 and Cantillon's assets have grown to more than $5 billion, according to the Wall Street Journal.





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