AbCap restructures to stave off firesale

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Absolute Capital Management, the hedge fund that saw its share price collapse after its co-founder unexpectedly quit last month, will seek to stave off a firesale of assets next week when it puts a sweeping restructuring plan to shareholder vote in a Grand Cayman hotel.

The beleaguered firm hopes to get 75 per cent of its investors to agree to lock up their cash in four of its eight funds for a year to allow it time to exit holdings in thinly traded, illiquid stocks. These holdings would be moved into special "side-pocket" funds to be wound down in an orderly way over the coming year.

AbCap managers, led by chief executive Jonathan Treacher, have met 70 per cent of the firm's investors, who have been broadly supportive of the proposals. The company said it was "encouraged by the indications of support received for the proposed fund restructuring and expects that fund shareholders will vote to approve the restructuring proposals at the forthcoming meetings."

The vote, to be held on 27 October, has been forced by a shareholder, John Bruhl, who filed a motion in a Cayman court to force the liquidation of two of the firm's funds. AbCap won a temporary adjournment of the motion on the conditions that it hold the vote on the island, where the company is incorporated, and that the motions be passed with at least 75 per cent approval.

Before Mr Bruhl's motion, the company's "side-pocket" plan would have required only a two-thirds approval from investors sent by post. If the restructuring fails to get sufficient support, the affected funds could be forced into "voluntary liquidation."

AbCap saw more than 80 per cent of its value evaporate after Florian Homm, its co-founder and chief investment officer, quit last month via a public letter that was highly critical of his former colleagues. Since then, two managers of its German fund have resigned. The company, listed on the Alternative Investment Market, ended the day at 73.5p per share.