The new insiders

Sat Apr 1, 2006

Managers are inviting investors into club deals; membership promises perils as well as profit

When larger-than-life corporate raider Nelson Peltz mounted his activist play for the board of ketchup giant Heinz last month, he invited along some much smaller guys: Clients of his hedge fund firm, Trian Fund Management, were offered the chance to invest directly in Heinz alongside Peltz through a so-called co-investment transaction.

For Trian, the deal presumably provided an opportunity to bulk up for its proxy war and to curry favor with investors in its newly-minted hedge fund firm. The investors, meanwhile, were given a chance to time an investment in Heinz with Trian - and potentially exploit a stock runup spawned by Peltz's activist play.

This was no anomaly.

Increasingly, hedge fund investors are getting invited to join the club that hedge funds used to reserve for other big funds that could reciprocate with entrée into similarly...

ISSN: 2151-1845 / CDC10004H

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