Fallout Between Harbinger And Early Backer Harbert?
Hedge Fund Alert reports today that Harbinger Capital is trying to buy out its early backer, Alabama-based Harbert Management. The split comes at an odd time, but the decline in Harbinger assets under management, which went from $26 billion in 2008 to only $9 billion currently may have something to do with it: the flagship fund has fallen 27.8% while the Special Opportunities Fund has plummeted 56.1%, excluding redemptions. Nonetheless, Harbinger did well for Harbert over the years with no losing years since inception, and in fact returned 116.1% in the flagship fund and 170.4% in the Spec Ops Fund in 2007.
Harbert had provided $25 million in seed funding when Harbinger launched in 2001, and after a "mutual" decision, Phil Falcone is now in the process of repurchasing the seed stake for an undisclosed sum. Post the deal, Falcone will own 100% of the fund. Harbert will maintain current investments with the various Harbinger funds: Harbinger Capital Partners Fund 1, Harbinger Capital Partners Special Situations Fund and the offshore versions of these. Harbinger will continue to rely on Harbert for operational support. In the meantime, Harbinger which has invested lots of money in such recent flops as New York Times (20% stake) and Cleveland Cliffs (10%), is probably looking at more pain going forward.