The Morning Brief: Investors Bail Out of Lampert’s ESL

So much for being the next Warren Buffett. Edward Lampert, who once managed more than $15 billion, is said to be suffering a rash of redemptions, which would put his hedge fund, ESL Partners, below the $5.1 billion he said he was managing a year ago in a regulatory filing, according to reports.

Although no one knows which investors are to receive Sears Holdings stock sold earlier this week to meet redemption requests, the New York Times DealBook blog reports that when Goldman Sachs led a group of wealthy individuals and institutions to invest $3.5 billion in ESL in 2007, they agreed to a lockup that expired at the end of 2012. Over the years, several of the luminaries who are said to have bailed out of the fund include entertainment mogul David Geffen and members of the Ziff family.

Paul Singer’s Elliott Associates, the flagship hedge fund managed by his New York-based firm Elliott Management, disclosed in a regulatory filing it has “directly conveyed” to the board of directors of Riverbed Technology “its views on the appropriate next steps” that the company should take to increase shareholder value. On November 8, various Elliott entities disclosed they owned 10.4 percent of the shares of the network equipment maker. At the time the firm said it does not currently have a plan or proposal. Three days later Riverbed deployed the favored takeover defense these days — it instituted a poison pill.

Kenneth Griffin’s Citadel Advisors disclosed it owns 5.2 percent of Finisar Corporation, a manufacturer of optical communication components and subsystems. It is a passive position. Citadel also disclosed a 5.5 percent passive position in Taylor Morrison Home Corporation, a homebuilder.

Shares of J.C. Penney plunged 8.5 percent, to $8.84, after Hayman Capital Management’s Kyle Bass told Bloomberg he sold his stake in the company. The stock is now down 12.5 percent in the past two days and has fallen by 55 percent for the year. “We learned a lesson in perception changing quickly,” Dallas-based Bass said in the Bloomberg Television interview, adding that he still holds the company’s debt.

Shares of Microsoft, a target of activist-focused firm ValueAct Capital, fell 2.41 percent after Ford CEO Alan Mulally told CNBC there is “no change in my plan” to remain with the car maker, dampening hopes among some that he would take the Microsoft CEO spot. However, other observers still think he did not definitively rule out the possibility.

London-based Meditor Capital Management is shutting down its European equity hedge fund, according to a Bloomberg report. The firm told investors that it conducted an internal review and decided that its portfolio managers should no longer have control over individual portions of the fund, a decision which would cut down how much capital the firm could run. The firm also said new European rules requiring disclosure of short positions have negatively affected it. The $3 billion firm said the liquidation can occur within a “few weeks.”

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