All the news is not bad these days for the fabled Bass brothers.
By Hal Lux
October 2001
Institutional Investor Magazine
Last month a $2 billion sale of Disney stock by some members of the Fort Worth, Texas, family triggered a flood of news reports speculating that the billionaires had lost big money on the Magic Kingdom and other long-term investments.
Maybe, but in the trading markets, one of the Bass brothers who unloaded Disney is having a decent year. The BBT Fund, a hedge fund managed by Sid Bass, is up more than 9 percent this year through the end of September. Sid Bass was a pioneer in arbitrage investing, and BBT focuses on relative-value trading strategies that the family has quietly used for decades. (Although people tend to talk about the Bass brothers - Sid, Edward, Lee and Robert - as a unit, they don’t always invest together.) BBT, which manages hundreds of millions worth of Bass family money as well as outside investments, is said to be very active in the esoteric world of utility bond and stock arbitrage.
BBT, like the rest of the Bass empire, keeps a very low profile, but a private fundraising presentation made earlier this year at a Goldman Sachs hedge fund symposium says the fund parcels out its money among convertible arbitrage, long-short equity, fixed-income, merger arbitrage, volatility arbitrage and short-equity managers. Sid Bass handles asset allocation.
The fund’s objective is to “achieve a positive, risk-adjusted absolute return of about three times the risk-free rate, with low correlation to the U.S. equity markets and with about the same volatility as the broad U.S. bond market,” according to the presentation. Most of the fund’s positions are in U.S. securities, and it runs with leverage that ranges from 1.25-to-1 to 2-to-1, says the presentation - a conservative range by hedge fund standards. BBT, in various forms, has been a part of the Bass investment empire for decades. Longtime family associate Tommy Taylor ran a predecessor fund that used many of the same managers but only invested Bass money. In 1999 Sid Bass announced plans to open the operation to investors, converting it into a hedge fund that was supposed to be called Bass Brothers Taylor.
The hedge fund was launched, but Taylor soon resigned, and Sid Bass stepped up to play a more active role in the fund’s operation. SEC filings made by BBT indicate plenty of energy company and utility stocks, but no Disney.
