New York-listed hedge fund manager GLG partners says it had already taken steps to shift the prime brokerage exposure of its funds away from Lehman Brothers before the US investment bank f
New York-listed hedge fund manager GLG partners says it had already taken steps to shift the prime brokerage exposure of its funds away from Lehman Brothers before the US investment bank filed for bankruptcy on Monday.
In a statement, GLG says that over the past few months it has devoted ‘considerable time and effort’ to the management of its counterparty risk exposure with respect to its prime brokers and other counterparties, including Lehman, Merrill Lynch, which was acquired by Bank of America on Sunday, and insurance giant AIG, which has been rescued by a USD85bn bailout from the US Federal Reserve.
GLG says all its funds have at least two prime brokers and in nearly all cases, at least one prime broker is a commercial bank. Following its precautionary steps, the firm says, the GLG funds have no counterparty risk exposure to either Merrill Lynch or AIG.
Last week GLG transferred substantially all of the positions of its funds still with Lehman to other prime brokers. The majority of these transfers have already settled and the firm expect the remainder to settle shortly. It says it believes the funds’ residual exposure to Lehman will not be material.
Lehman is also a shareholder in GLG, owning approximately 33.7 million shares through Lehman (Cayman Islands), a Cayman Islands company, about 13.7 per cent of the total GLG stock outstanding. The Lehman subsidiary is party to a shareholder’s agreement that restricts the sale of any GLG shares owned by Lehman until November 2 this year.
After that date, 25 per cent of the total shares held by Lehman (some 8.4 million shares) become free of the transfer restrictions in the shareholder’s agreement. A further 25 per cent will become free of the lock-up on November 2, 2009 and the remainder a year later.
Established in 1995, GLG aims to focus on preserving clients’ capital and achieving consistent, superior absolute returns with low volatility and low correlation to equity and fixed income markets. At the end of June the firm managed assets exceeding USD23bn.
