Richard C. Breeden, former head of the SEC, “is considered a pillar of corporate ethics and governance,” writes the New York Times. But is he qualified to run a hedge fund?
Breeden’s fledgling activitist hedge fund, Breeden Partners, is focussed on underperforming companies and last month started shaking things up at Applebee’s restaurant chain. Breeden Partners owns a 5.2% stake in the chain, and Breeden has nominated four close friends to its board with a view to gaining a say in how the company is run, the NYT reports.
“I guess I wonder, how does a guy with no investment management experience run a hedge fund?” the article quotes Philip Goldstein of Bulldog Investors as asking. “It’s kind of like starting at the top — you’d think you’d want to work at a hedge fund for a while.”But Laurence Harries, one of the friends nominated to the Applebee’s board, argues that Breeden “is a lot less likely to be fooled than a lot of people who are pure investors, because he understands the mechanics of corporate governance and securities laws.”
Breeden has a strong financial background – he ran top accounting firm Coopers & Lybrand – and he made his name as an adviser in ethics and corporate governance.
But his fund has been unable to raise its target of $1.25bn, bringing in around $500m, including $400 million from the Californian pension fund Calpers, the California pension fund. The fund posted a 7.73% in Q3 2006.
And Breeden seems to have betrayed his own ideal of transparency by having affiliate entities of his fund registered in the Cayman Islands. Breeden’s spokesmen declined to answer questions on whether Breeden Partners would prohibit itself from investing in companies for which he had served as a court-appointed monitor, the New York Times said.
Hmm.