A former senior partner at Davidson Kempner Capital Management has claimed that the hedge fund still owes him $80m following his departure from the firm, in a legal dispute that has exposed allegations of internal tensions at they firm, according to a report by Bloomberg.
Michael Herzog, who was previously among Davidson Kempner’s most senior figures, alleges that he was forced to leave the firm and redeem his ownership interest. According to a UK employment claim, 10% of the redemption remains unpaid, amounting to approximately $80m.
Herzog has also claimed that his departure cost him a further $170m in retirement benefits.
The allegations were made in legal proceedings brought under UK whistleblower protections and later became public through related proceedings in the US after a request to unseal documents.
Davidson Kempner, which manages approximately $40bn, and chief investment officer Tony Yoseloff have denied Herzog’s allegations.
The dispute centres on claims that Herzog’s departure followed disagreements over the firm’s management and governance. According to the court filings, Herzog accused Yoseloff of adopting an increasingly centralised management style and resisting challenges to his decision-making.
Herzog alleged that Yoseloff had accumulated effective control over the firm through changes to its governance arrangements and had sought to operate Davidson Kempner without sufficient accountability.
The former partner also raised concerns about risk management and oversight at the firm’s distressed debt business, which he claimed managed approximately $5bn.
Among the allegations was a claim that a Davidson Kempner partner had suffered losses of more than $500m without sufficient accountability. Herzog also alleged that the firm was exposed to risks arising from Yoseloff spending part of his time managing his own family office.
Another area of disagreement was Davidson Kempner’s decision to establish an insurance business. Herzog claimed the venture diverted resources from the firm’s core hedge fund operations and was a low-margin business that was significantly unprofitable.
According to the claim, Herzog raised a series of concerns directly with Yoseloff during a meeting in London in 2023. He also allegedly warned that the firm could face serious financial pressure if it experienced a major investor redemption.
Herzog claimed that Yoseloff subsequently threatened to remove him from the firm on multiple occasions. At a meeting in January 2024, Yoseloff allegedly told Herzog he had considered forcing him out over the Christmas period but had decided against it, while warning him to “step into line”.
Herzog said he ultimately decided to leave in late 2024. Rather than receiving the retirement benefits he expected, he claims he was required to redeem his interest in Davidson Kempner.
The fund has allegedly retained 10% of that redemption, representing the $80m Herzog says remains outstanding.
A Davidson Kempner spokesperson described the allegations as a contractual dispute involving a dissatisfied former employee and said the firm and Yoseloff “unequivocally deny” the claims.
The firm said it intends to defend the allegations and accused Herzog of attempting to increase the amounts payable to him following his departure.
Herzog has also filed proceedings in New York seeking access to documents and deposition testimony from Davidson Kempner. The US case is running alongside the UK employment claim.
