Jon Corzine’s attempted comeback vehicle — hedge fund JDC-JSC — won the SEC’s go-ahead to register last week, with a number of caveats.
Commodity futures broker MF Global, Corzine’s last firm, blew up in 2011 due to excessive leverage and poor risk management surrounding an ill-fated bet on European sovereign debt. Corzine paid $5 million to settle with the Commodity Futures Trading Commission and accepted a lifetime ban from the futures industry.
The SEC accordingly imposed a raft on limits on JDC-JSC, including that Corzine not serve on the advisory or compliance boards, have no authority over compliance officers, and retain an independent consultant for at least two years to make sure it follows securities rules, the order stated. It also stipulated that client portfolios must be capable of being liquidated within five trading days, limiting the type of assets in which the firm can invest.
But will clients flow into JDC-JSC, now that a regulator signed off?
Likely no, according to an informal poll conducted by Institutional Investor.
“I wouldn’t meet with him,” said one foundation CIO who, like all respondents, spoke on the condition of anonymity. Corzine is “untouchable. The MF Global thing was bad, bad, bad, bad.” The CIO went on to point out Corzine’s age, suggesting at 72 years old, the former Goldman Sachs co-chairman and New Jersey governor is past his investment prime.
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JDC-JSC does not have a public website, and calls to the fund and CFO Justin Mauskopf requesting comment were not returned. The fund had only raised $53 million of a targeted $300 million as of February, Bloomberg reported.
“I wouldn’t let Corzine manage my laundry pick-up,” a public pension investment staffer remarked. The head of a major pension’s hedge fund portfolio flatly said, “No.”
“Not a chance; wouldn’t even take a meeting if I were a CIO,” replied one former public fund chief. “He’s been out of it too long; I’m a bit shocked he’s trying to get back in. I.e., he’s dreaming! Why doesn’t he concentrate on doing some real charity work, and I don’t mean hosting fundraisers.”
JDC-JSC may have more luck getting meetings than actual investments — particularly with allocators curious to meet Corzine and unconcerned about optics, such family office or private foundation investors.
One person reported meeting with Corzine and/or JDC-JSC staff twice, but said “I wouldn’t invest.” The allocator called Corzine a “nice guy” but “not a young trader anymore… He tried to explain what happened” with MF Global, but “if you can’t hold onto the trade because of a margin call, ultimately you are wrong.”
One European CIO would take a meeting, but not to consider allocating. “It’s been my practice not to refuse meetings because you always learn something — particularly in the last 15 minutes. This is one case where I’d tell the sales person, ‘Look, I’ll be upfront with you. I’ll take the meeting but there will not be a transaction at the end of it.’”
This CIO wasn’t as confident in JDC-JSC flopping as some others were. He said, “I’ve always been amazed by the ability of Goldman folks to bounce back.”