Looking back on Paul Singer’s witch hunt and the implosion of MotherRock

August 03, 2011   Josh Friedlander

This week, AR also revisits Kingdon’s midyear stagnation.

One year ago

»» Kingdon Capital Management had produced mixed midyear results, with the flagship global long/short equity strategy down slightly and the credit fund up 5.6% through June.

As Mark Twain once put it, “History does not repeat itself, but it does rhyme." This year, the flagship strategy was down 1.55% through June 30 while the Kingdon Credit fund had gained 4.9%. Despite the performance, or perhaps because of it, Kingdon has made several recent hires to fill vacant positions and expand its staff.

»» Citing the firm's 26-page investor letter, AR ran a story about the recent performance at Elliott Associates and founder Paul Singer’s dismal view of opportunities to invest (profitable events were "low across the board,” he wrote) and politics ("the federal government has acted as if it could do literally anything it wants while spending unlimited amounts of money"). The firm took no issue with the article, but when Singer learned that a followup story would include a list of investment positions from a supplement to the letter, he took legal action to compel the magazine to reveal its source of the information. AR declined to reveal its sources, and the petition, which was unprecedented, received widespread press coverage, including a half-page article in the New York Post. Ironically, the coverage brought widespread attention to the information Elliott sought to keep out of the public eye. AR had planned a response by September, but Elliott dropped its motion less than a month after filing it. “This was a blatant attempt to bully us and it backfired,” AR editor Michelle Celarier wrote at the time.

Five years ago

»» MotherRock crumbled. The energy hedge fund notified investors that it was closing following heavy losses due to extreme volatility in natural gas prices. That summer, a heat wave caused a spike in the demand for natural gas and prices increased by 50% in a two-week period. The fund reportedly dropped 24% in June alone.

MotherRock was launched in 2005 by former New York Mercantile Exchange president J. Robert "Bo" Collins. He reportedly launched a venture called 1618 Group in 2007 to trade energy. The outcome of that venture could not be determined.

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