Regretfully Yours

  • 31 Jul 2007 at 9:49 AM
  • Citadel

Sowood Is So Sowwy

The letter a hedge fund manager sends to his/her investors in the event of bad news like, say, a meltdown, etc., is an exercise in trying to jam a huge ego and an “I’m sorry, but I’m not really sorry, but I’m saying I’m sorry” onto one page. We’ve been calling him out a lot lately for what he’s done wrong, but one thing James Cayne did right was his memo to investors. As you well know, Cayne informed them that, contrary to what he and his colleagues had been pretending in the weeks previous, Bear Stearns’ two hedge funds were worth jack. As this charade was getting exhausting, and not because it’s wrong to lie, the big guy took it upon himself to come clean with the sad sacks (his words) who were silly enough to give Bear their money only to watch it be lit on fire. This would have all been rather unfortunate, Cayne went on, if it were going to hurt employee compensation at year end, which it won’t, thank god, so that’s pretty much it. Shipshape.
Sadly, Sowood Capital Management founder Jeff Larson has apparently not mastered the art of this particular love letter, and comes off as actually rather regretful and apologetic in the one he sent to his investors yesterday, re: selling “substantially all the funds’ [Sowood Alpha Fund LP and Sowood Alpha Fund Ltd] portfolio to Citadel,” which was more than happy to take them on. Larson even says “We are very sorry this has happened.” It’s actually all rather off-putting. Full letter (which seems to imply Sowood will be shutting down) after the jump.

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