Receiving a few more client-redemption requests than it would’ve preferred (which you’d think would be zero but is actually more like 2-3, just to keep things interesting), money-market fund Sentinel Management Group asked the U.S. Commodity Futures Trading Commission today to allow it to halt redemptions until those up top can get it together to honor investors’ demands for their money in a timely fashion, CNBC reports. In a letter to clients, Sentinel said, “We had previously thought that the market would return to some semblance of order and that our clients would not join the panic. Unfortunately, this has not been the case.”
If you have a notion as to what gave Sentinel the impression that its clients wouldn’t want to avoid losing money and that everything in the market would work itself out, send it to tips at dealbreaker dot com. Anyone offering anything slightly more elucidating than “That’s what always happened on Full House” and “it’s actually a little-known fact that Sentinel investors all live under one big rock, kind of like a group home” has a copy of Mergers and Acquisitions coming his way.
Update: Greg Newton writes:
This is (potentially) HUGE…While Sentinel is barely a pimple on the wider money-market world, and in the overall scheme of things insignificant in the futures markets, it operates in a specialized niche where the consequences of its failure may spread out of all proportion to its size.
Fund Halts Withdrawals [CNBC]
Damn clients.
Love the fact that CNBC instantly announces an “all clear” from the CFTC….
Yes this doesn’t appear to have happened anywhere else, except at AXA, ODDO, BNP and Sentinel. These were the only firms sucking at the nipple of marginal yield.
Game on, I say. We’ve only just begun to out the bull market geniuses.
“The CFTC has no authority in this area,” the CFTC official, who asked not to be identified, told Reuters. “This isn’t something we do.
“We have no role in whether or not the company does this and whether the client accepts it,” the official said.
SENTINEL
SENTINEL MANAGEMENT GROUP, INC
________________________
EDENS CORPORATE CENTER
650 DUNDEE ROAD, SUITE 460
NORTHBROOK, ILLINOIS 60062
(847) 412-4400
FAX (847) 412-4409
August 13, 2007
Dear Client:
As you undoubtedly know, the credit markets, along with most other markets, have experienced
a liquidity crisis in the past several weeks. Investor fear has overtaken reason and has induced a period
in which most securities have simply ceased to trade. We’ve all read the stories about one hedge fund
or another suffering losses related to subprime exposure and closing down or being rescued. This fear,
while warranted in some cases, has spilled over into the rest of the credit market and liquidity has dried
up all over the street. In addition, investment banks and securities firms are stuck with LBO deals
they’ve already entered into but cannot find buyers for the bonds so must inventory them themselves.
This liquidity crisis has caused bids to disappear from the market and makes it virtually impossible to
properly price securities or to trade them. High grade securities are trading like junk bonds as panicked
investors dump names like General Electric at Tyco‐like prices.
We have carefully monitored this situation for the past several weeks and have met regularly to
discuss the potential impact it may have on our clients. We had previously thought that the market
would return to some semblance of order and that our clients would not join in the panic.
Unfortunately, this has not been the case. We are concerned that we cannot meet any significant
redemption requests without selling securities at deep discounts to their fair value and therefore causing
unnecessary losses to our clients. We contacted the CFTC today and asked for their permission to halt
redemptions until we can honor them in an orderly fashion.
Sentinel has always sought to protect your interests and since our inception in 1980, we have
never experienced a situation quite like this one. We will continue to monitor the markets and we will
raise cash as opportunities present themselves.
We understand that this will obviously cause inconveniences on your part however, at present,
we do not see an alternative and we don’t believe it is in anyone’s best interest if a run on Sentinel took
place and we were in a forced liquidation mode.
We value your trust in us these past 28 years and this has been a very difficult decision for us
and we understand the implications of this decision both on you and on Sentinel. We feel, however,
that this is the best way to assure you the best possible value on your investment.
We will remain in contact with you and update you as things progress.
Sincerely,
Sentinel Management Group, Inc.
When your money manager doesn’t even know under which regulator realms it falls, thats probably a good reason to withdraw your money (or to not invest in the 1st place, but i digress)
Sentinel asks the CFTC about withdrawal matters? That could make one wonder how the money was backed. WTF???
Awesome. Isn’t this kind of news so much better than hearing about the buyout deals all day long?…Good thing those days over…
rumor Lehman is going to announce a large loss
http://www.reuters.com/article/ousiv/idUSN1443322520070814
(is there a link to your quote anon 12:13)
Business Model: Cash Management Firm, for CTAs and Hedge Funds. They transfer excess cash balances (not required for margin) to increase returns. Sentinel invests these funds into CP and various other juicy paper. As of 10/2006 they managed 1.5 bio.
hkp, didn’t see it online. may be on reuter’s website. I see it in the reuter’s app – kobra
here you go
http://www.reuters.com/article/fundsFundsNews/idUSWBT00739620070814
Briefing.com is running the same quote about Sentinel/CFTC matters
“They transfer excess cash balances (not required for margin) to increase returns.”
So you’re getting margin calls, you can’t liquidate your leveraged assets because there isn’t even a bid in the market, and the only thing you have resembling a cash account has had redemptions canceled indefinitely. I guess the next strategic move is tell your investors that their NAV is unknowable, cancel all redemptions, and finally take that summer vacation you had been planning.
tomorrow we’ll all have a better idea about the demands on hedge funds from the “gimme my god*mn money back” crowd. Should be interesting.
that letter reads like one of the managers had their college son/daughter put it togther
Goldamn thats a lotta money you lost!
check this out. I used the wayback machine to go back and look at Sentinel’s website. You have to read this to believe it. Some of their benefits include: daily liquidity, no client losses ever and high yields
http://web.archive.org/web/20070104214924/http://www.sentgroup.com/why.html
great link !!! the best is “will your funds be available when you need them?” their answer is “absolutely”. brace yourselves for tomorrow…….
Whoever mentioned this before is right – the true fallout from Sentinel will not be known (at least) until tomorrow, when some fund receives a margin call that they cannot meet because their funds are locked up at Sentinel and then their clearing broker is on the hook. Oh, that is after all of the fund’s positions get sold out indiscriminantly by a margin clerk who makes $35K a year. Ouch.
all you Pikers have no idea what you are talking about in regards to this…you will see….the sun will rise tomorrow. Go find another trainwreck to dance around, ghouls.