21-10-2008, 09:33 AM
http://www.ft.com/cms/s/0/001385a8-77bd-...fd18c.html
Atticus Capital principals to be hit where it hurts most
By James Mackintosh
Published: September 1 2008 03:00 | Last updated: September 1 2008 03:00
For most of the past decade, Atticus Capital has been a force to reckon with in global markets. From its base in New York, the hedge fund, which had more than $20bn of assets under management at its peak last year, helped dictate the course of mega-mergers and corporate strategy at some of the world's biggest companies - and made a fortune in the process.
Founded by Tim Barakett, a Canadian, in 1995, the young manager soon hired Nathaniel Rothschild, son of Lord Jacob Rothschild, to act as co-chairman and draw on his connections to raise money. He subsequently poached David Slager, a British-educated Dutch trader, from Goldman Sachs, who launched a European fund that grew rapidly to pass the original Global fund Mr Barakett runs.
All three of them went on to make personal fortunes in the bull market, which ended in summer last year. Mr Barakett and Mr Slager were estimated by Trader Monthly magazine to have made $250m-$300m each last year, with Mr Rothschild adding to his family's wealth with a similar income. The three of them, together with other staff, have more than $1.4bn invested in the $14bn fund, with Mr Barakett and Mr Slager having the vast bulk of their personal wealth tied up in Atticus.
When the credit crunch hit in August last year, Atticus was caught out. The firm had a $1bn position in Britain's Barclays Bank, where it was publicly opposing efforts by John Varley, chief executive, to buy Dutch rival ABN Amro - a deal that Barclays lost to Royal Bank of Scotland - as well as major unhedged holdings across many large companies. Mr Slager's fund plunged more than 10 per cent in the month, its worst result yet, as banking shares, and Barclays, tumbled. Still, investors were unconcerned. The funds made back all their losses over the next two months, and the European fund ended 2007 up 28 per cent after fees - not a patch on the 44 per cent and 63 per cent gains of the previous two years, but still a phenomenal result for such a large fund.
This year, investors have been more worried. The fund's low levels of short-selling, which can hedge against falling markets, and its enormous position in Deutsche Börse and NYSE Euronext, the stock exchanges, has hammered its results. Mr Slager has recorded his seven worst months since the credit crisis hit, and at the end of August was down 32.9 per cent this year. Mr Barakett has fared slightly better, but was still down 25 per cent.
Now the fund and its top executives are braced for at least a year without bonuses, as Atticus will receive no performance fees - the bulk of its income - until the funds have made back their losses - requiring gains of 50 per cent for Mr Slager and 33 per cent for Mr Barakett.
"Perhaps one concludes that the time is over for them," said one investor. However, other investors said the dire results over the past 12 months were just a "natural" give-back of some earlier profits. Clients who put money with Mr Slager when his fund launched in 2001, for example, have still made more than three and a half times their money, turning $10m at launch into almost $37m.
Nicola Horlick, in the latest report to shareholders in Bramdean, the London-listed investment fund she runs, said its holding in Atticus European was expected to be volatile, and was kept small as a result. "Given that the manager maintains concentrated positions, the heavy losses in declining markets are not surprising," she wrote.
Still, this year's losses have been galling for Atticus, which believes it has picked strong companies in sectors which are fundamentally sound.
"We continue to be disappointed by what we believe is an over-reaction in specific themes to concerns about growth," it said in a report to Atticus European investors last month.
"These valuations indicate persistent fear, and reflect the willingness of many investors to de-risk their portfolios uneconomically," it wrote. "Historically, these conditions have indicated the wrong time to sell equities, and we believe that remains true today."
The latest regulatory filings show Atticus running with three big investment themes at the end of June: mining and oil/energy, including a $1bn holding in ConocoPhillips; financials and stock exchanges, including more than €1bn ($1.47bn) of Deutsche Börse, and a combined $1bn in Visa and Mastercard; and US rail, with $1bn of Union Pacific and another $1bn in Burlington Northern Santa Fe and Norfolk Southern. The hedge fund focuses on large companies, unlike many rivals, taking very large, concentrated positions. It originally started out following the "event-driven" strategy: buying cheap stocks where a corporate event could provide a catalyst for a jump in the price.
As it grew bigger and more powerful it began to provide the catalyst itself, pushing management to take action it believed would boost the stock. In the case of Phelps Dodge, the miner, it even hired its own investment bankers to find a buyer, ahead of its sale last year to Freeport-McMoRan. It halved its $1.1bn equity stake in the second quarter, although it also bought $200m worth of options.
Atticus has come under scrutiny for its links to The Children's Investment fund, an aggressive London activist hedge fund run by Chris Hohn, a Harvard friend of Mr Barakett.
The two have frequently bought the same stocks or taken the same general views - including their focus on US rail - and are the two largest shareholders in Deutsche Börse.
They worked together to prevent the exchange's purchase of the London Stock Exchange, although subsequently they have diverged in views, particularly with regard to ABN, where Mr Hohn was pushing the Dutch bank to sell, while Atticus was trying to stop Barclays from buying.
Concerns that they could be seen as acting together, highlighted by an inconclusive investigation by the German regulator, were behind Mr Hohn's resignation last year as a director of RIT Capital, the listed Rothschild investment trust, where Mr Rothschild is also a director. RIT is an investor in Atticus, and the hedge fund rents its London office from RIT.
Atticus Capital principals to be hit where it hurts most
By James Mackintosh
Published: September 1 2008 03:00 | Last updated: September 1 2008 03:00
For most of the past decade, Atticus Capital has been a force to reckon with in global markets. From its base in New York, the hedge fund, which had more than $20bn of assets under management at its peak last year, helped dictate the course of mega-mergers and corporate strategy at some of the world's biggest companies - and made a fortune in the process.
Founded by Tim Barakett, a Canadian, in 1995, the young manager soon hired Nathaniel Rothschild, son of Lord Jacob Rothschild, to act as co-chairman and draw on his connections to raise money. He subsequently poached David Slager, a British-educated Dutch trader, from Goldman Sachs, who launched a European fund that grew rapidly to pass the original Global fund Mr Barakett runs.
All three of them went on to make personal fortunes in the bull market, which ended in summer last year. Mr Barakett and Mr Slager were estimated by Trader Monthly magazine to have made $250m-$300m each last year, with Mr Rothschild adding to his family's wealth with a similar income. The three of them, together with other staff, have more than $1.4bn invested in the $14bn fund, with Mr Barakett and Mr Slager having the vast bulk of their personal wealth tied up in Atticus.
When the credit crunch hit in August last year, Atticus was caught out. The firm had a $1bn position in Britain's Barclays Bank, where it was publicly opposing efforts by John Varley, chief executive, to buy Dutch rival ABN Amro - a deal that Barclays lost to Royal Bank of Scotland - as well as major unhedged holdings across many large companies. Mr Slager's fund plunged more than 10 per cent in the month, its worst result yet, as banking shares, and Barclays, tumbled. Still, investors were unconcerned. The funds made back all their losses over the next two months, and the European fund ended 2007 up 28 per cent after fees - not a patch on the 44 per cent and 63 per cent gains of the previous two years, but still a phenomenal result for such a large fund.
This year, investors have been more worried. The fund's low levels of short-selling, which can hedge against falling markets, and its enormous position in Deutsche Börse and NYSE Euronext, the stock exchanges, has hammered its results. Mr Slager has recorded his seven worst months since the credit crisis hit, and at the end of August was down 32.9 per cent this year. Mr Barakett has fared slightly better, but was still down 25 per cent.
Now the fund and its top executives are braced for at least a year without bonuses, as Atticus will receive no performance fees - the bulk of its income - until the funds have made back their losses - requiring gains of 50 per cent for Mr Slager and 33 per cent for Mr Barakett.
"Perhaps one concludes that the time is over for them," said one investor. However, other investors said the dire results over the past 12 months were just a "natural" give-back of some earlier profits. Clients who put money with Mr Slager when his fund launched in 2001, for example, have still made more than three and a half times their money, turning $10m at launch into almost $37m.
Nicola Horlick, in the latest report to shareholders in Bramdean, the London-listed investment fund she runs, said its holding in Atticus European was expected to be volatile, and was kept small as a result. "Given that the manager maintains concentrated positions, the heavy losses in declining markets are not surprising," she wrote.
Still, this year's losses have been galling for Atticus, which believes it has picked strong companies in sectors which are fundamentally sound.
"We continue to be disappointed by what we believe is an over-reaction in specific themes to concerns about growth," it said in a report to Atticus European investors last month.
"These valuations indicate persistent fear, and reflect the willingness of many investors to de-risk their portfolios uneconomically," it wrote. "Historically, these conditions have indicated the wrong time to sell equities, and we believe that remains true today."
The latest regulatory filings show Atticus running with three big investment themes at the end of June: mining and oil/energy, including a $1bn holding in ConocoPhillips; financials and stock exchanges, including more than €1bn ($1.47bn) of Deutsche Börse, and a combined $1bn in Visa and Mastercard; and US rail, with $1bn of Union Pacific and another $1bn in Burlington Northern Santa Fe and Norfolk Southern. The hedge fund focuses on large companies, unlike many rivals, taking very large, concentrated positions. It originally started out following the "event-driven" strategy: buying cheap stocks where a corporate event could provide a catalyst for a jump in the price.
As it grew bigger and more powerful it began to provide the catalyst itself, pushing management to take action it believed would boost the stock. In the case of Phelps Dodge, the miner, it even hired its own investment bankers to find a buyer, ahead of its sale last year to Freeport-McMoRan. It halved its $1.1bn equity stake in the second quarter, although it also bought $200m worth of options.
Atticus has come under scrutiny for its links to The Children's Investment fund, an aggressive London activist hedge fund run by Chris Hohn, a Harvard friend of Mr Barakett.
The two have frequently bought the same stocks or taken the same general views - including their focus on US rail - and are the two largest shareholders in Deutsche Börse.
They worked together to prevent the exchange's purchase of the London Stock Exchange, although subsequently they have diverged in views, particularly with regard to ABN, where Mr Hohn was pushing the Dutch bank to sell, while Atticus was trying to stop Barclays from buying.
Concerns that they could be seen as acting together, highlighted by an inconclusive investigation by the German regulator, were behind Mr Hohn's resignation last year as a director of RIT Capital, the listed Rothschild investment trust, where Mr Rothschild is also a director. RIT is an investor in Atticus, and the hedge fund rents its London office from RIT.
The shadow is a moral problem that challenges the whole ego-personality, for no one can become conscious of the shadow without considerable moral effort. To become conscious of it involves recognizing the dark aspects of the personality as present and real. This act is the essential condition for any kind of self-knowledge.
Carl Jung - Aion (1951). CW 9, Part II: P.14