No one wants to be a quitter. But it's hard out there for a hedge funder. Between falling fees, tricky markets, staff cuts and all sorts of other headaches, one could be forgiven for deciding that the time is right for a little career change. For those who've found themselves in this precarious position, it would do well to observe the separation of Steve Kuhn from Pine River Capital Management for a true masterclass in leaving one's firm with grace and aplomb.
Kuhn's story has everything. Dramatic, live-television resignation announcement? Check. Loudly professed commitment to philanthropic endeavors? Check. At least a year of negative returns preceding retirement? Check. Acrimonious legal battle on the way out? Check-plus:
Pine River sued Kuhn in September, claiming he demanded millions of dollars more in severance than he was entitled to under the company’s Limited Partnership Agreements. Kuhn countersued claiming Pine River’s founder and majority owner Brian Taylor reneged on a deal to boost Kuhn’s stake in the firm, reducing it instead.
The basic dispute is that Kuhn says he'd negotiated for increased ownership in the partnership post-2014, but instead saw his ownership dwindle as the fixed-income fund he managed sputtered. Pine River says it had the discretion to reduce Kuhn's stake as it saw fit. Kuhn says he's owed millions. Pine River says he's owed nothing.
Without seeing the putative agreement at the center of the case it's impossible to weigh in on the merits. But we have to Kuhn credit for forcing Pine River into a situation where it had to put this in its legal complaint:
While Kuhn’s “desire to donate to charity is noteworthy, at issue is the terms and payments owing to defendant upon his departure,” the company said in its initial complaint. “Despite all efforts to reach an agreement,” Kuhn refused to accept the fact that the terms of the LPA govern his exit package, Pine River said.
It's one thing to argue that the hedge fund you quit in dramatic fashion still owes you millions of dollars for your work; it's another thing entirely to say you're owed millions for future philanthropic efforts. That takes moxie.
[NOTE: This article has been corrected to clarify that Pine River's fixed-income fund was down for only one full year – 2015, as well as early 2016 – but not “multiple” full years, as originally implied. We regret the confusion.]