Wedding Bells at Aurelius Hedge Fund Spur Redemptions
(Bloomberg) -- Hedge fund managers can’t catch a break. Not even when it comes to finding love.
Aurelius Capital Management, the distressed-debt hedge fund known for its lengthy battle against the government of Argentina, is seeing about $900 million -- almost a third of its assets -- leave this year, according to people familiar with the matter.
The firm’s predicament is not uncommon in an industry that has suffered billions of dollars in withdrawals after multiple years of middling performance. But that’s not the whole story at Aurelius, whose funds jumped 6 percent on average this year through November. More than half of the redemptions are from a couple of investors who pulled their money after founder and chief investment officer Mark Brodsky alerted clients that he planned to marry a top lieutenant, Eleanor Chan, the people said.
Earlier this year, Brodsky, 65, married Chan. She joined Aurelius as an analyst in 2005, a year after graduating from Yale, and rose through the ranks to managing director. She was named co-portfolio manager last year with David Tiomkin, who’s been with the firm for a decade. She’s one of five people, including Brodsky and Tiomkin, who make investment decisions at Aurelius.
Despite Brodsky’s high profile in the world of distressed debt -- the lawyer-turned-investor has taken on the likes of General Motors Co., Argentina and Puerto Rico in court -- he’s tried to otherwise avoid the limelight. Brodsky refuses to be photographed or discuss his personal life, and through a spokesman declined to comment for this story, as did Chan.
Pension plans and other large institutions have become more wary about family ties at hedge funds since Bernard Madoff’s Ponzi scheme came to light a decade ago, according to Ted Eichenlaub, a partner at ACA Compliance Group. Madoff employed several family members including his two sons, who were alleged by the trustee to have obstructed a regulatory probe that could have exposed the fraud earlier.
“It’s a review point that investors should be concerned about on some level, but it’s not rampant across the industry as a disqualifying factor when investing in a firm,” said Eichenlaub.
Familial hires aren’t unheard of in the hedge fund industry. Izzy Englander’s son Michael is an executive at his father’s firm, Millennium Management, and Thomas Laffont is a senior managing director at his brother Philippe’s hedge fund, Coatue Management. Gordon Singer is a partner at his father Paul’s Elliott Management, and runs the London office for the $35 billion hedge fund. Billionaire Marc Lasry started Avenue Capital with his sister Sonia Gardner, and hired his daughter Sophie to work in business development at the firm, according to her LinkedIn profile.
After Brodsky solidified his relationship with one managing director, another, Dan Gropper, who led debt restructuring efforts at the firm, will leave at the end of the year. Aurelius, which will start 2019 with about $2.4 billion, told clients last month that other money managers have assumed more responsibility for restructuring positions and that Gropper wants to spend more time with his family.
Gropper didn’t respond to a request for comment.
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