Hedge Funds That Took Roman Abramovich’s Billions Have No Way Out
Firms with Abramovich money can continue to manage it, but what they can’t do is redeem his stake or accept new cash from him.
(Bloomberg) -- When Concord Management came calling with the promise of checks for as much as $100 million, more than 100 hedge funds and private equity firms jumped at the offer.
Most of the $6 billion behind Concord belongs to Roman Abramovich, who earlier this month was sanctioned by the European Union and the U.K. as part of sweeping penalties against billionaires believed to be close to Russian President Vladimir Putin. Now the firms are stuck: Their clients are asking questions, they can’t get rid of the tainted money and they can’t immediately collect fees on it either.
Firms with Abramovich money can continue to manage it, but what they can’t do is redeem the oligarch’s stake, accept new cash from him or allow him to sell his shares to another investor, according to Cayman Island rules, where many of the funds have offshore entities. If a firm owes money to Abramovich, say because of the sale of an asset, the proceeds must go into a blocked account. The firms can charge fees, but they can’t collect them until the sanctions are dropped.
Abramovich, who suffered a suspected poisoning after meeting in Kyiv as part of peace talks, hasn’t been sanctioned by the U.S.
Michael Matlin, who founded Concord in 1999, mostly steered money to the biggest and best-known funds. Over more than two decades, Brevan Howard Asset Management, Millennium Management, Carlyle Group Inc., D.E. Shaw & Co., Sculptor Capital Management Inc. and Apollo Global Management Inc. -- as well as smaller firms including Sarissa Capital Management and Ratan Capital Management -- have counted the Tarrytown, New York-based manager as a client, according to people familiar with Matlin’s firm. Some of the relationships ended years ago, they added.
Representatives for the firms declined to comment.
Clients have been canvassing the money managers they invest with to find out if they have money from sanctioned Russian billionaires. The firms have defended taking money from them, saying the sums amount to a tiny percentage of total assets.
In the days following Russia’s invasion of Ukraine, a few hedge fund investors said they got inquiries from Russians interested in selling their partnership stakes worth $50 million or $100 million. It’s unclear whether any of those transactions were completed. A few firms, including Kirkoswald Asset Management and Eisler Capital, kicked out Russian investors before sanctions went into effect.
Matlin, 58, has kept a low profile despite the billions that passed through Concord. He has no LinkedIn profile and his firm has no website. He holds an MBA from Columbia University and started his career as an analyst at a multibillion dollar hedge fund in New York, according to his director bio for the Regeneration Group Ltd., a U.K.-based advisory firm.
The Concord founder said in a statement his company is “a consulting firm that provides independent third-party research, due diligence and monitoring of investments.”
Several firms that have done business with Concord describe a closer relationship than the typical consultant and consider Concord as the investor in the fund, though the actual money came to the firms through offshore entities. In a 2014 court case involving Highland Capital Management, Heath Kihn, a Concord employee, said his firm represented offshore investors Bradfield Overseas Holdings Ltd. and Netherfield Holdings Ltd. that invested upon Concord’s recommendation.
Kihn characterized Concord in that case as a “multifamily office/fund of funds.” A Concord spokesperson said it was inaccurate to describe the firm as a fund of funds.
Concord invested in three of Carlyle’s European real estate funds launched before the financial crisis, according to a person familiar with the firm. Matlin sat on the limited partner advisory board of two of them, both of which have since been disbanded. The three funds are old enough to have either been completely -- or on the verge of being -- wound down. A Carlyle representative declined to comment.
Trophy Assets
Abramovich, 55, with a net worth of $13.7 billion according to the Bloomberg Billionaires Index, amassed his fortune from the sale of privatized assets acquired from the former Soviet Union, including oil giant Sibneft and Aeroflot. He sold his aluminum assets to fellow oligarch Oleg Deripaska, but retains stakes in companies including Russian steelmaker Evraz. He’s been reinvesting the proceeds in trophy assets for two decades, including purchasing Chelsea Football Club, London properties and private jets. He’s being forced to sell Chelsea and has moved his superyachts to Turkey out of the reach of European sanctions.
It’s unclear whether the hedge funds and private equity firms knew that Abramovich was the underlying investor in Concord. Firms may also have been unconcerned given that he was only recently sanctioned, although some oligarchs faced a similar fate after Russia’s actions in Ukraine in 2014.
Funds often count on their administrators to tell them if they are dealing with someone who is subject to sanctions or involved in money laundering. They also often use so-called comfort letters from banks or law firms that have done business with an entity to help fast track due diligence.
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