R3 Capital Partners | Hetdge Fund Notes
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Resource #1 (12.16.08) R3 Capital Management LLC’s $1.5 billion hedge fund lost 31 percent in six months after its founding by Rick Rieder mainly because its assets were frozen by the bankruptcy of his former employer, Lehman Brothers Holdings Inc., according to three people familiar with the matter.
The R3 Capital Partners Master Fund, which opened in May, declined 10 percent in October, said the people, who didn’t want to be identified because the information about the New York-based fund is private. Assets held in the prime brokerage unit of Lehman Brothers, which filed for bankruptcy in September, accounted for about two-thirds of R3’s losses, they said. Final November returns haven’t been provided to clients, the people said.
“I guess that’s the price you pay for being loyal to Lehman,” said Adam Sussman, director of research at Tabb Group LLC, a New York-based adviser to financial-services companies. “Lots of hedge funds are running losses after being loyal to just one prime broker.” source
Resource #2: Lehman Brothers Holdings Inc (LEHMQ.PK) agreed on Wednesday to sell its 45 percent stake in hedge fund R3 Capital Partners for $250 million in cash and a $250 million investment in another fund managed by R3.
Lehman, which filed for bankruptcy protection last month, acquired the stake in May in return of a roughly $1 billion investment, according to document filed in U.S. Bankruptcy Court in Manhattan.
R3 Capital is run by Richard Rieder, a former head of global principal strategies at Lehman.
Lehman owned the non-voting, minority ownership stakes in the master fund, general partner, special limited partner and management company of R3 Capital Partners, an asset manager of funds investing primarily in corporate bonds and loans.
In the second quarter, Lehman sold assets and transferred derivative risk of about $4.5 billion at fair value to R3. The assets sold were primarily corporate bonds and loans. Read more...