Horlick hits back as Tchenguiz prepares a coup

In the wake of the Madoff scandal and plummeting returns, the redoubtable fund manager is fighting for her reputation. Nick Clark reports
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The Independent Online

The flagship fund of investment manager Nicola Horlick, once christened "Superwoman" by the City, came out fighting yesterday after claims that more than half its investors want to see it liquidated. The increasingly bitter row intensified last night as the investors attacked the claims made by Bramdean Alternatives' board in a letter earlier that day. This is the latest blow to Ms Horlick, who is still reeling from losses incurred during the Bernard Madoff scandal.

Property tycoon Vincent Tchenguiz, the fund's largest investor, last week revealed plans to oust the board – which does not include Ms Horlick – and wind up the fund after 20 months of underperformance.

The close relationship between Mr Tchenguiz and Ms Horlick, who used to talk every week, has come under strain as the battle gathers pace.

Ms Horlick was feted as a "superwoman" in the asset management industry as she managed to juggle a senior job with raising five children. At the age of 30 she earned the nickname – which she professes to dislike – after heading up Morgan Grenfell Asset Management and then Société Générale's asset management operations in London. Ms Horlick, now 47, set up her own venture Bramdean Asset Management (BAM) in January 2005 and enjoyed strong backing from investors.

Bramdean Alternatives, a fund specialising in hedge fund and private equity investments, was then listed in 2007, and Mr Tchenguiz took a stake of almost 29 per cent. It is entirely independent of BAM, with its own board, but Ms Horlick was chosen to act as fund manager.

The fund has suffered from the financial crisis as hedge funds have imploded and private equity looked to hoard cash rather than invest. Yet investors including Mr Tchenguiz have increasingly criticised the investment strategy, the illiquid shares and the private equity business' funding gap.

Since Alternatives launched, negative returns have hit 61 per cent compared with sector falls of 23 per cent. Net asset value hit $181.6m (£120m) last month, down from $257.7m when it listed. The share price has dropped by almost half, and Mr Tchenguiz believes the fund could be worth nothing in just two years, calling the model "broken". Ms Horlick's reputation was hurt by the Madoff scandal. On December 13, BAM announced that Bramdean Alternatives had 9.5 per cent of the company's net assets with Madoff, losing the fund about £13m. Despite protestations that she did not manage that part of the portfolio, Ms Horlick was blamed by many.

Mr Tchenguiz went on the offensive this week and was extremely critical of Bramdean Alternatives' board and strategy, as well as the investment performance, overseen by Ms Horlick.

Jennifer Wick, chief investment officer of Consensus Business Group, said: "They have been talking to one another. I would assume because of this action she may not want to speak to him at the moment." Ms Horlick was unavailable for comment. In a twist of fate, they are both based at the same Mayfair address. "It could make for some interesting chats in the lift," one source said.

Mr Tchenguiz's first broadside emerged as he came out against the fund last Thursday when it revealed it had been approached by a mystery suitor keen on a full takeover. He does not believe the returns on a sale would be satisfactory.

However, Consensus Business Group believes that liquidating its investments could raise up to $104m and would get closer to the net asset value of the funds than a sale of the entire fund.

The comments were just the start. The following day, Bramdean Alternatives received a requisition from Elsina, controlled by Mr Tchenguiz's Consensus Business Group, to remove the entire board including chairman Brian Larcombe, a former chief executive of 3i.

Elsina has proposed three directors, who are already on its payroll, to replace them. Elsina said its "principle concerns about the status quo centre on the illiquidity of the company's shares and the over commitment within the company's private equity and specialty funds portfolio".

One source close to the situation said: "Tchenguiz is making no secret of the fact he wants to put his people in and liquidate the fund."

Should it be liquidated, Ms Horlick will miss out on the lucrative 1.5 per cent annual management fees, around £2m a year, and performance fees of up to 10 per cent should it hit certain benchmarks. The loss would not hole BAM beneath the waterline, however, as it also manages or advises on $1.4bn worth of funds, but it would be another reputational hit.

Elsina said that it has the support of over 50 per cent of shareholders, all it needs to oust the board at the EGM. It would need 75 per cent to remove BAM as its fund manager, although that matters little if the fund is wound up.

As the situation became increasingly tetchy, the independent board hit back in a letter yesterday calling on Elsina to reveal its supporters, and called its maths on the shareholder support as "faulty".

Elsina replied last night that the letter had "no merit and the board of Bramdean will shortly receive a letter from Elsina's lawyers making a detailed rebuttal of all the points raised." It remains confident the resolutions will be passed.

The Tchenguiz brothers: A brief history

The Tchenguiz name has been a byword for investment losses during the financial crisis, but it is Robert, rather than his brother Vincent who has suffered in the downturn. Vincent, who is at the centre of the row with Bramdean Alternatives' board, has seen valuations in his property portfolios hit, but his company, Consensus Business Group, has so far come through the downturn "quite unscathed". The two brothers made the Sunday Times Rich List in 2007 with their personal holdings valued at £850m, but the following year Vincent made a solo appearance. He was valued at £200m, while Robert dropped off the leaderboard after losses from investments in companies such as J Sainsbury and Mitchells & Butlers.

The brothers set up Rotch Property Group in 1982, building a £4bn commercial property portfolio at the market's peak. Vincent then set up Consensus in 2001. As the crunch has bitten, Consensus has sold some big properties including Shell-Mex House and has also recently offloaded assets from its green investment fund.

Yet news that Vincent was back in the market emerged in March, following negotiations to buy Standard Chartered's headquarters, his first UK property deal since the summer.