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Bruce Berkowitz Closing Funds to New Investors


txlaw
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Unless I'm mistaken, Bruce B is closing the Fairholme family of funds to new investors as of the end of February.

 

http://www.sec.gov/Archives/edgar/data/1096344/000091957413000409/d1350636_497.htm

 

Effective as of the close of business on February 28, 2013, the Fund will suspend the sale of shares to new investors, including new investors seeking to purchase Fund shares directly from the Fund or indirectly through financial intermediaries.  Subject to the rights of the Fund to reject any order to purchase shares or to withdraw the offering of shares at any time, shares will remain available for purchase to existing shareholders.

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Investors still have time to purchase the funds if they chose to, as the amendment does not become effective until Feb 28th.

I recall a recent video interview he did where he was questioned about how he doesn't have permanent capital to work with. I recall Berkowitz being coy and saying something to the effect of, "stay tuned". 

 

While it is perfectly understandable to close the Fairholme Fund, t is a bit odd to close the two smaller funds.

 

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might be his first step in his transition to permanent capital!

 

Yes, I think this is what is happening.  He learned a very tough lesson with the amount of redemptions he had to deal with.  I think he may have been at the point where "how do even my long-term investors lose faith in me?  Time to reduce that risk."  Cheers!

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might be his first step in his transition to permanent capital!

 

Yes, I think this is what is happening.  He learned a very tough lesson with the amount of redemptions he had to deal with.  I think he may have been at the point where "how do even my long-term investors lose faith in me?  Time to reduce that risk."  Cheers!

 

Yup.  :)

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I don't understand how closing the fund to new investors lead to permanent capital. Does he think his current investor base is abnormally sticky or are you guys saying he is going to close up shop eventually and use something like st. Joe as his investment vehicle?

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Beware,... he might see in the next days and final weeks some flush of new money coming in from new investors, and that might be the less intelligent capital. I personally would have structured the closing differently,... close to first time/totally new investors immediately,... and let only remaining investors still purchase shares in the next month.

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Beware,... he might see in the next days and final weeks some flush of new money coming in from new investors, and that might be the less intelligent capital. I personally would have structured the closing differently,... close to first time/totally new investors immediately,... and let only remaining investors still purchase shares in the next month.

 

With a $10k minimum requirement to open an account, hopefully this helps a bit...I sure as hell know I don't have 10k laying around just like that!

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Have no fear. Existing investors can still purchase shares whenever they want. So buy some shares now, and a million more in five years.

 

"Effective as of the close of business on February 28, 2013, the Funds will suspend the sale of shares to new investors, including new investors seeking to purchase Fund shares directly from the Funds or indirectly through financial intermediaries. Shares of the Funds will remain available for purchase to existing Fund shareholders. Each Fund retains the right to make exceptions to the suspension of the sale of its shares to new investors, and reserves the right to subsequently commence selling its shares to new investors. Investors may request information by calling Shareholder Services at 1-866-202-2263."

 

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I don't understand how closing the fund to new investors lead to permanent capital. Does he think his current investor base is abnormally sticky or are you guys saying he is going to close up shop eventually and use something like st. Joe as his investment vehicle?

 

Yes, I think he feels beholden and responsible for the capital he currently manages for existing partners.  He'll continue to operate the fund for them.  And I think you'll now see more things happening within St. Joe or some vehicle of that nature.  Cheers!

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Investors still have time to purchase the funds if they chose to, as the amendment does not become effective until Feb 28th.

I recall a recent video interview he did where he was questioned about how he doesn't have permanent capital to work with. I recall Berkowitz being coy and saying something to the effect of, "stay tuned". 

 

While it is perfectly understandable to close the Fairholme Fund, t is a bit odd to close the two smaller funds.

 

Review the video beginning at 26.30 minutes (and listen to section 28.40 min)

 

"We have a few things we are thinking about. It is possible..."

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Investors still have time to purchase the funds if they chose to, as the amendment does not become effective until Feb 28th.

I recall a recent video interview he did where he was questioned about how he doesn't have permanent capital to work with. I recall Berkowitz being coy and saying something to the effect of, "stay tuned". 

 

While it is perfectly understandable to close the Fairholme Fund, t is a bit odd to close the two smaller funds.

 

Review the video beginning at 26.30 minutes (and listen to section 28.40 min)

 

"We have a few things we are thinking about. It is possible..."

 

 

it's interesting he looks away and come back with a little smile. heh

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Investors still have time to purchase the funds if they chose to, as the amendment does not become effective until Feb 28th.

I recall a recent video interview he did where he was questioned about how he doesn't have permanent capital to work with. I recall Berkowitz being coy and saying something to the effect of, "stay tuned". 

 

While it is perfectly understandable to close the Fairholme Fund, t is a bit odd to close the two smaller funds.

 

Review the video beginning at 26.30 minutes (and listen to section 28.40 min)

 

"We have a few things we are thinking about. It is possible..."

 

 

it's interesting he looks away and come back with a little smile. heh

 

In the video, he also says that he had a standard mutual fund but people want to pay him more. I really hope he's not gonna leave the little guy behind and manage hedge funds (around 29:25). :(

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Investors still have time to purchase the funds if they chose to, as the amendment does not become effective until Feb 28th.

I recall a recent video interview he did where he was questioned about how he doesn't have permanent capital to work with. I recall Berkowitz being coy and saying something to the effect of, "stay tuned". 

 

While it is perfectly understandable to close the Fairholme Fund, t is a bit odd to close the two smaller funds.

 

Review the video beginning at 26.30 minutes (and listen to section 28.40 min)

 

"We have a few things we are thinking about. It is possible..."

 

 

it's interesting he looks away and come back with a little smile. heh

 

In the video, he also says that he had a standard mutual fund but people want to pay him more. I really hope he's not gonna leave the little guy behind and manage hedge funds (around 29:25). :(

 

At this point, I don't think the hedge fund route would provide him any more comfort than running the mutual fund.  A 2-year lockup would not have made a whole lot of difference to him, but it probably would have saved some fools from selling out before the rebound.  I suspect he is going the permanent capital route, and it very well may be through St. Joe.  Cheers!

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Is one legally allowed to run a hedge fund and a mutual fund at the same time?

 

I wonder if that's the plan. Let the mutual fund capital slowly run-off, try and coax the big holders into a hedge fund structure, and one day pull the plug on the mutual fund.

 

 

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Is one legally allowed to run a hedge fund and a mutual fund at the same time?

 

I wonder if that's the plan. Let the mutual fund capital slowly run-off, try and coax the big holders into a hedge fund structure, and one day pull the plug on the mutual fund.

 

yeah, heeber at cgm (cgmfx) was doing it for a while, so do the guys at AQR.

 

Sanj, I hope you're right! :)

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I think Fairholme will simply close the funds. Nothing else.

 

A closed-end fund sufficiently serves the purpose of turning the holdings into permanent capital.

 

But people can still pull out. All it means is that there will likely be more outflows than inflows, correct?

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