Investors could close Alchemy as Moulton plans new start-up

Resignation of 'key man' puts future of private-equity house in doubt
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The Independent Online

Jon Moulton, the legendary buy-out investor who dramatically quit Alchemy last week, is said to be already working on plans to set up a new fund.

Sources close to Mr Moulton said the private equity expert, who became a household name for his high-profile attacks on his own industry, is thinking about starting a small generalist turnaround fund.

One Alchemy investor, said: "This is a huge blow-up, but once the dust is settled Jon is looking at another start-up, concentrating on what he knows best which is distressed situations."

Another source close to Alchemy added that Mr Moulton's resignation is now expected to trigger the "key man" clause and that LPs – investors in the fund – would now call for it to be wound up.

The banker, who is also an Alchemy investor, added: "This row is going to run and run. Everyone in the industry is extremely nervous right now and if you ask any investor in the world – even at the big funds like Blackstone – if they want to take cash, I bet they would all say they want the money. No one wants to make any commitment to any new investments with the markets so uncertain. "

One of the catalysts for Mr Moulton's sudden exit was the decision by Alchemy and its partners to turn the fund into a specialist financial services buy-out house and to appoint Dominic Slade to replace him when he was due to retire in October 2010.

Mr Moulton, in his resignation letter to investors, explained that he believed this strategy was wrong as it wasted a "spectacular opportunity in our area of perceived greatest strength."

The withdrawal of several investors recently meant that Alchemy's investment capacity would fall from £400m a year to about £100m this year, he said in his typically forthright letter to investors. He added this is due to a number of market conditions – low new deal activity, weak investment performance and continuing losses – that had sapped confidence.

A regular media commentator on financial affairs, the 58-year-old also admitted to Alchemy investors that he – and his partners – were to blame for the current situation. "I feel I owe investors an apology for quite a few things," he said. "Together with my partners past and present I made too many investment and people errors."

No one at Alchemy was available to comment but other sources suggested that Mr Moulton had once again gone a step too far in making his resignation letter public and airing the firm's disagreement in such a manner. They also said that, contrary to Mr Moulton's statement, the fund had not yet made a decision to concentrate on financial buyouts.