Carl Icahn to return all his clients' money
Billionaire hedge-fund manager Carl Icahn is returning outside investors' capital, marking the end of an era as he joins a string of prominent stock pickers who no longer want the headaches of overseeing other people's money.
Icahn, known for a knack of picking winners and his ability to face off with captains of industry, says he has grown weary of overseeing others' money as markets are becoming more unpredictable and investors more demanding.
While it may sound 'corny' to some, the losses that were incurred by investors in our funds in 2008 bothered me a great deal more, in many respects, than my own losses, the 75-year-old investor wrote in a six-paragraph-long letter sent to investors. I do not wish to be responsible to limited partners through another possible market crisis, he added.
A copy of the letter, dated March 7, was released in a regulatory filing on Tuesday morning.
Outsiders had invested roughly $1.75 billion in Icahn's $7 billion Icahn Capital hedge fund which the activist investor launched in 2004 in part to let him flex his financial muscle in pushing for change in corporate boardrooms.
That should leave plenty of firepower for Icahn to continue battling with resistant targets.
I don't think Carl Icahn is ever going to go away, said Damien Park, a managing partner at Hedge Fund Solution, which helps clients place money with activist investors. Investing is in his blood, it is in his DNA and he's still got plenty of capital to continue rattling cages.
Most recently Icahn battled for control of power company Dynegy Inc
Over the years, Icahn's returns have been strong and 2011 started on a good note -- the fund has gained 8.7 percent in the first two months of the year, far more than the average fund's 2.08 percent return during the same time period. Since 2004 Icahn's funds have returned 106.9 percent, he told investors.
In the $1.9 trillion hedge-fund industry, the news caught investors off guard, especially after Icahn gave no indication in recent interviews of wanting to cut back.
I was surprised, certainly said Charles Gradante, co-founder of industry consultants Hennessee Group. He's an icon in the industry and we are still trying to figure out what kind of an effect this will have on the industry.
By taking this step, Icahn joins a number of other well-known hedge-fund managers, including George Soros' protege Stanley Druckenmiller, and Julian Robertson's former employee Chris Shumway, who recently returned their investors' money.
To some investors, Icahn's exit marks the end of an era of elder statesmen like Soros, Robertson and Icahn managing vast hedge-fund assets and handing the baton over to a younger generation including William Ackman and Dan Loeb.
During the financial crisis, when many managers restricted investors' exits, Icahn let his clients take money out, something he was clearly proud of, but which shrank the size of outside money in the fund.
And Icahn's letter included a warning of a possibly weaker market environment this year. While we are not forecasting renewed market dislocation, this possibility cannot be dismissed, Icahn wrote.
Icahn grew up in Queens, New York, and in 1957 graduated with a degree in philosophy from Princeton University in New Jersey. He enrolled in medical school at New York University but quit and went to work on Wall Street, where he opened his own investment firm in 1968.
One of the most notorious corporate raiders in the 1980s, Icahn was involved in the takeover battles for RJR Nabisco, Texaco and Viacom among many others.
Icahn's son, Brett, also a Princeton graduate, has been working with his father for the past decade. The portfolio Brett manages with David Schechter, has seen a 50 percent return in the last eight months, Icahn told Reuters last week.
There really is no nepotism, if anything it's more difficult for him, but he's proven out really well, Icahn said in an interview last week.
In that interview, Icahn gave no indication he wanted to cut back. I enjoy doing it, he said. It's sort of like a chess game. I find it fascinating ... What else would I do?
(Reporting by Svea Herbst-Bayliss; editing by John Wallace and Gunna Dickson)
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