Flamand’s Hedge Fund Said to Suffer Partner Exits as Assets Fall
Two partners at former Goldman Sachs Group Inc. trader Pierre-Henri Flamand’s hedge fund will leave the firm after it lost money and assets shrank, two people with knowledge of the decision said.
Oliver Haslam and Casper Lund will depart as London-based Edoma Partners LP cuts costs in the face of investor redemptions, said the people, who declined to be identified because the firm is private. Edoma’s assets fell by about half over the past year to $1.17 billion, according to a note to clients this month that was obtained by Bloomberg News. Its capital will decline further as the total excludes investor redemption requests that haven’t yet been met, said the people.
Flamand, 42, founded Edoma in 2010 after stepping down as the head of Goldman Sachs’s (GS) biggest proprietary trading unit amid a government backlash against banks betting on markets. Expectations that Flamand would continue his success as a hedge- fund manager helped him to raise more than $2 billion from investors. The fund has declined 6.9 percent since it started trading in November 2010, according to a note sent to clients this month.
Haslam, 38, and Lund, 40, didn’t return messages to their Edoma e-mail addresses and phone numbers seeking comment. Edoma Chief Operating Officer Martina Slowey declined to comment while Flamand didn’t respond to an e-mail.
Haslam and Lund are part of Edoma’s six-person senior investment team and are listed as partners at the firm, according to Edoma marketing documents from May that were obtained by Bloomberg. Haslam previously worked at hedge funds including Ken Griffin’s Citadel LLC and Paul Singer’s Elliot Management Corp., the document said. Lund, who focused on investing in European stocks at Edoma, was previously employed by Morgan Stanley and Goldman Sachs.
Among Edoma investors who’ve put in requests to pull money from the hedge fund are New York-based Blackstone Group LP (BX), the world’s largest private-equity firm, said the people. Blackstone spokesman Peter Rose declined to comment.
Flamand has been partly hurt by poor timing. His hedge fund focuses on so-called event-driven investing in which traders try to predict triggers for stocks and bonds such as corporate restructurings, mergers, management changes and share sales.
Event-driven hedge funds gained 4.6 percent on average since Edoma started trading two years ago as concern over Europe’s sovereign debt crisis led to periods of high correlation between asset prices, making it difficult to predict price moves for individual companies, according to Chicago-based Hedge Fund Research Inc.
The corporate deal-making that Edoma bets on also hasn’t returned to the level seen before the collapse of Lehman Brothers Holdings Inc. triggered a global financial crisis in 2008. Global companies have announced mergers and acquisitions valued at $1.6 trillion so far this year compared with $2.4 trillion for all of 2011, according to data compiled by Bloomberg. In 2007, there were $4 trillion of mergers.
Edoma has trailed rival hedge funds and stock indexes, prompting investors to lose patience, said the people. The Standard & Poor’s 500 Index (SPX) gained 27 percent since Edoma’s inception and the Stoxx Europe 600 Index rose 8.8 percent.
When Flamand started Edoma, he set up two share classes with different fees and investing terms, according to the marketing documents. Investors in Class A were charged a 2 percent management fee and a 20 percent performance fee, and could redeem in the first year as long as they were willing to let Edoma keep 3 percent of their money. The penalty expired last October for Class A clients who were first-day investors, the documents show.
Class B clients were required to invest at least $75 million and charged discounted management and performance fees of 1.8 percent and 18 percent, respectively, according to the documents. In return, they were barred from pulling any money within 12 months of their investment.
Class B investors were for the next 12 months subject to the 3 percent withdrawal penalty, a restriction that starts to expire at the end of this month. Clients who want their money back by the start of 2013 are required to give Edoma 60 days advance notice, the marketing documents say.
Flamand, who led Goldman Sachs’s principal strategies group, was among the first proprietary traders to leave amid a debate in the U.S. Congress to rein in risk taking by lenders following a $700 billion taxpayer rescue of financial companies. Employees of the principal strategies unit who joined him at Edoma include Ali Hedayat, Emmanuel Niogret and Evan Pearce.
President Barack Obama signed legislation in July 2010 that included a provision called the Volcker rule, named for its advocate, former Federal Reserve Chairman Paul Volcker. The measure restricts banks with customer deposits backed by the U.S. government from using their own money to make speculative bets on markets.
Goldman Sachs decided within weeks of the Volcker rule’s approval to shut down the principal strategies group. Other traders who worked on the desk and have since left to form hedge funds include Morgan Sze, who briefly replaced Flamand as global head, and Daniele Benatoff and Ariel Roskis, who started trading at London-based Benros Capital Partners LLP in June 2011.
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