Caught in the wreckage

Tue Aug 26, 2008




Following private equity into deals, hedge funds now find themselves stuck with losing propositions

By Pete Gallo

Collapsed leverage buyouts are taking their toll on some big-name hedge funds that have followed private equity into the top dozen deals that have come undone.

Funds affected by the LBO fallout include D. E. Shaw, Citadel Investment Group, Farallon Capital Management, Marathon Asset Management, Gabelli Funds, Stark Offshore Management, Satellite Asset Management, Maverick Capital, Third Point and Silver Point Capital.

With the stock market teetering and credit still scarce, investors think it's too early to say the troubles are over. "The situation with many of these [target] companies seems to have stabilized, but with the high level of uncertainty, marked by daily volatility in the equity markets, there are clearly continuing challenges on the road ahead," says Ernest Boles, chief executive of Auda Group, a $5 billion fund-of-funds manager.

Auda is cautiously...

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