Looking back on Sandra Manzke’s call to arms

By Simone Foxman

Wed Nov 27, 2013

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Absolute Return also revisits Anthony Lawler’s European equity prediction.

One year ago

»» GAM portfolio manager Anthony Lawler predicted a brighter future for European equities following a tumultuous year in European politics. "While the growth outlook will likely be challenging in Europe for the foreseeable future," he wrote in a column for Absolute Return, "the opportunity set appears to be changing for equity hedge managers."

A year later, the numbers suggest his call was right. The MSCI Europe Index is up 22.8% since November 27, 2012. And although hedge funds on both sides of the pond have been investing in European equities, the EuroHedge European Equity Index (EUR) was up 10.09% for the year through October, exceeding composite indices for both Europe (6.49%) and the Americas (6.32%).

"We have been happy with European [equity] managers because not all active managers have done well this year," Lawler said in an email today. "Several European managers have done well by either picking equities that have benefited from global growth and flows or from keeping their net long bias. But even more so from taking exposure to names more globally positioned and in some cases direct exposure to Japan and U.S."

Five years ago

»» Sandra Manzke, the founder of funds of hedge funds Tremont Group Holdings and Maxam Capital Management, sent a highly circulated email to hedge fund investors. In it, she railed against managers who imposed gates, suspended redemptions, and generally failed to report performance data as the market got pummeled by the U.S. financial crisis. She wrote:

I am appalled and disgusted by the activities of a number of hedge fund managers…2008 is certainly a poster child for the need for better regulation. Now I feel that investors need to form an organization to protect against the egregious hedge fund manager. Hedge fund managers do not disclose their investors and we are each operating in a vacuum. We should be able to unite to change how this industry operates. (Full text here.)

She called for the establishment of a Hedge Fund Investors United Forum to police unruly fund managers and demand investor rights.

Weeks later, however, she was embroiled in a firestorm. Both Maxam Capital Management and Rye Asset Management, a division of Tremont, were some of Bernard Madoff’s largest investors. Madoff was arrested on December 11, 2008, after he confessed to running a Ponzi scheme.

The five ensuing years have not been kind to Manzke. In early 2009, she gave up her attempt to organize hedge fund investors and found herself a defendant as investors attempted to reclaim their assets from businesses that indirectly profited from Madoff’s scheme.

On September 17, the U.S. Bankruptcy Court for the Southern District of New York approved a $97.8 million settlement between the Madoff Recovery Initiative and entities representing Manzke, her family, and Maxam Capital.

Manzke remains a defendant in a lawsuit against Kingate Management, for which she was a director from 1995 to 2003. A settlement that would have closed the case is being appealed, according to Jonathan Cogan, an attorney at law firm Kobre & Kim who represents Manzke.

Cogan said Manzke declined to comment, citing ongoing litigation.

ISSN: 2151-1845 / CDC10004H

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