Claren Road Asset Management, the global long/short credit
firm praised by investors last year for its decision to forgo
raising gates and allow unfettered redemptions, has come under
fire recently for how it handled its Lehman Brothers
Whereas many hedge funds wrote off assets stuck in Lehman
Brothers to zero when that firm collapsed into bankruptcy last
September, Claren Road didn't. It did write down their value by
half, according to an investor. But some Claren investors are
grumbling that the move allowed the firm to post a profit for
2008 and collect performance fees, which are paid only when
results are positive.
"I am not against paying incentive fees," says one Claren
investor, who asked not to be identified. "I am just against
paying money that was not made."