The Morning Brief: Kleinheinz to Shutter; Griffin's $15m Condo

December 03, 2012   Stephen Taub

Another one-time high-flying hedge fund is closing down. John Kleinheinz told clients he is shutting down the value-focused Kleinheinz Capital Partners, which has about $2 billion in assets, after a period of poor performance. From 2003 through 2007 his hedge fund, The Global Undervalued Securities Fund, generated double-digit returns, according to the U.S. Offshore Funds Directory, and the fund had generated 21 percent compound annual returns since inception. Kleinheinz made an appearance on Alpha’s Rich List in 2007, when he earned $380 million, ranking number 22. However, the following year he lost 32.7 percent. Kleinheinz racked up a more than 18 percent gain the following year and a 22 percent return the year after that, but he lost 25 percent in 2011 and was roughly flat through June of this year.

Citadel’s Ken Griffin earlier this month shelled out $15 million for a penthouse that takes up the entire 66th floor of Chicago’s Park Tower. The purchase was deemed the most expensive condominium in Windy City history. Back in 2009, Griffin paid $6.9 million for a condo directly above his new floor, suggesting he is planning to build a spectacular duplex. Griffin bought the new condo from another hedge fund manager, General Welfare Group's Richard Cooper, who reportedly paid $3.32 million in 2000.

Hedge fund firm TPG-Axon is turning up the heat on SandRidge Energy. TPG-Axon, which owns 6.5 percent of the stock, told SandRidge’s board of directors in a letter that it will seek support from the other shareholders for a variety of actions, including removing and replacing the board of directors. "We continue to believe that SandRidge stock is dramatically undervalued and that a sensible restructuring or sale of the company could provide enormous upside for shareholders," stated Dinakar Singh, founder of TPG-Axon Management LP, in the letter.

Hedge funds may wind up obstructing the deal that will allow Greece to reduce its debt by repurchasing its bonds, says a Nomura analyst report. Hedge funds are said to hold as much as $28.6 billion of the debt but may not have an incentive to go along with Greece’s exchange offer, which is expected to be announced in a few days, if they are offered less per dollar than the current market price for the paper. Hedge funds that currently hold Greek debt include Dan Loeb’s Third Point and Louis Bacon’s Moore Capital.

Avenue Capital’s Marc Lasry says he is surprised many hedge funds who had previously supported President Obama in the 2008 elections switched allegiances during the recent presidential campaign and supported Mitt Romney. "Anyone on Wall Street has done very well since the president came into office," he told Reuters TV. He acknowledged that many hedge fund managers were upset with President Obama’s railing at banks and rich people. "I hope it wasn't about higher taxes," said Lasry, a long-time supporter of Democrats, especially the Clintons.

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