Here Is "Gate" #2: $1.3 Billion Hedge Fund Founded By Ex-Bear Stearns Traders, Just Suspended Redemptions

Tyler Durden's picture

Yesterday, in the aftermath of the shocking news that the Third Avenue Focused Credit Fund was liquidating and had gated investors due to its "illiquid" portfolio, we had one simple prediction:

"What this means is that now that the dreaded "gates" are back, investors in all other junk bond-focused hedge funds, fearing they too will be gated, will rush to pull what funds they can and submit redemption requests, in the process potentially unleashing a liquidity - and liquidation - scramble within the hedge fund community, which will first impact bonds and then, if the liquidity demands continue, equities as well."

We had to wait just over 24 hours to be proven correct, because moments ago Dow Jones reported that the $1.3 billion Manhattan-based Stone Lion Capital, a distress-focused hedge fund, has just suspended redemptions after "substantial requests."

The WSJ adds:

It is the latest example of the sudden crunch facing traders across Wall Street looking to sell beaten-down positions.

 

Stone Lion manages around $1.3 billion and specializes in distressed debt and other risky investments that have plunged in value lately.

 

It received “substantial redemption requests” in its oldest hedge fund, the $400 million Stone Lion Portfolio LP, precipitating the decision, the firm said.

At least the had a pretty logo:


 

The management team via CapIQ:

 

And here is the punchline:

  • Alan Jay Mintz, CPA, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns
  • Gregory Augustine Hanley, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns

One really couldn't make this up.

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Tinky's picture

I'll say it again: negative feedback loops are a bitch.

Buckle up.

Baby Bladeface's picture

Hedging funds are now become like disengruntled host radio program: "No, do not take requests!"

knukles's picture

Dammit!  I was hoping to see one of my old buds listed on the personnel roster.

Say What Again's picture

How do I hedge my investment in this type of Hedge-Fund

I just want to have a nice safe conservative portfolio

Occident Mortal's picture

Could these assholes at least have waited until AFTER the fed picked up the smoking gun?

Amish FinEng's picture

NEW YORK, June 10, 2008 /PRNewswire/ -- Tudor Investment Corporation today announced that Gregory Hanley and Alan Mintz will join Tudor to establish a new investment management business focused on credit-related strategies. Hanley and Mintz join Tudor from Bear, Stearns & Co., where they served as Senior Managing Directors and co-heads of the Distressed Debt Group and Mr. Hanley served as co-head of the High Yield Trading Group.
Also joining as senior members of the new credit-related team will be Mitchell Sussman, Eric Friel and Howard Norowitz.

two hoots's picture

 

Coming to a Money Market Fund near you. Along with “break the buck” then NIRP.

 

manofthenorth's picture

Great time to put some Silver in your portfolio.

pilager's picture

WAIT A MINUTE!

What do you mean "coming to a money market near you"

Seriously question gentlemen, how exactly does this trickle into a general money market. Say a 401k or Ira, T Rowe with no brick and Mortor....

Poof! Wheres the money market?

Uchtdorf's picture

Good catch. So it's not their first rodeo.

Amish FinEng's picture

The Amish don't miss nufin!

Handful of Dust's picture

NB: News of fund problems and Wall Street bankruptcies will not be read on HuffPo or heard on NPR.

 

 

gregga777's picture

It's positive feedback that is a bitch. A process loop where small perturbations result in ever greater responses is an example of Positive Feedback.

Tinky's picture

Absolutely correct; I transposed.

Thanks.

delete entry's picture

negative feed back loop
a self balancing system that relies on feed back to balance it's self is getting noise instead of needed feedback, noise leads to even more noise and less signal

saldulilem's picture

Props, positive feedback loop with negative impulse input --> unbounded output :)

JRobby's picture

Funny they never seem to see the end coming as it looms so large?

ghengis86's picture

Escalator up, elevator down.

tdogg's picture

Stone Lion!(?) !

Isn't that a ganja strain??

For you bud enthusiast - think of Stone Lion for your next bag of kush.  Smoking that Stone Lion prospectus - that sh@#t be chronic.

Silver Sativa's picture

For *cough cough* research purposes only *cough cough cough*

https://www.leafly.com/

Vendetta's picture

No, you're thinking of Pineapple Express Capital Partners whom specialize in buying distressed debt

OpenEyes's picture

That's pretty much what I was thinking too.   A relatively small fund, but, still probably smart connected types.  That the fund is getting "substantial redemption requests", screams to me that somebody got a heads-up to bolt for the exits.  Next week could get really interesting.

Retired Guy's picture

Retired guy goes into broker, asks for safe interest income investment and comes out with bond fund papers. Happens all the time. Nobody explains small exit problem with bonds. Later, like now, grandpa sees the fund's share price is way down. He calls the broker to sell. A crime has been committed in slow motion. No banksters go to jail. Very sad. Grandpa stops buying steak, investigates dog food as alternative.

tarabel's picture

 

 

1) I hope you aren't referring to yourself when it comes to dietary matters.

2) Why oh why do people think it's a good idea to trust their wallet to some smarmy 20-something that they just met?

Lore's picture

I'd be cautious around the 60- and 70-somethings, as they've had time to fine-tune their techniques and prepare strategies for offloading blame onto subordinates who don't keep paper trails.

"Aaaand.. It's gone."

hongdo's picture

I think you mean positive feedback loop which leads to oscilation and chaotic states. 

Tinky's picture

Correct; I transposed.

Thanks.

THE COIN's picture

When you name your HedgeFund after a Library Doorstop your Trading acumen is already brought into question.

 

MayIMommaDogFace2theBananaPatch's picture

I am the Keymaster.  Are you the Gatekeeper?

RafterManFMJ's picture

It's not that we don't like you, it's that starting your post with an italic prevents an up/downvote.

Bangin7GramRocks's picture

"Now yous can't leave'" - Sonny LoSpecchio

stocktivity's picture

Announced after the close on a Friday, so they are hoping it gets buried by Monday morning. Let's see if something else blows up this weekend. There have to be others out there that took a beating this week.

Buck Johnson's picture

I know, when Monday comes around look out it will be bad really bad.  

 

explosivo's picture

I think you mean, positive feedback loops. Negative feedback loops are stabilizing. 

Not My Real Name's picture

Positive feedback is worse. And what we'll soon be seeing is a classic example of it in the form of a market panic.

Pumpkin's picture

It's kind of late on a Friday for something like that.

blue51's picture

^^^ haha! Ya, a Mortimer moment. Turn them back on!

gregga777's picture

The Federal Reserve's sole role is enriching Wall Street Banking Gangsters by stealing from the American People while the political parasites look the other way—because they are bribed to do so—and pretend not to notice.

Junerberno's picture

Icahn looks smart. Again.

Kaiser Sousa's picture

WHY O' WHY HAVE I ONLY ACCUMULATED GOLD AND SILVER OUTSIDE OF THE FRAUDULENT FINANCIAL AND DEBT BASED CURRENCY SYSTEM????

PLEASE TELL ME - WHY!!!!!!!!!!!!!!!!!!!!