A former chairman at the Securities and Exchange Commission is trying his hand at the hedge fund business, according to a report in yesterday's New York Times.
Richard C. Breeden, an advocate for corporate governance and a champion of companies on the brink of scandal, will form an activist fund similar to those operated by Carl C. Icahn. The fund, known as Breeden Partners, will look to profit from companies seeking to improve their corporate governance.
The start date is Jan. 1 and the fund is hoping to raise between $500 million and $1 billion. The fund will hold large positions in its investment companies and possess six to 12 investments at any given time.
Although it appears that Breeden has no experience when it comes to investing the money of others, the same cannot be said when it comes to his dealing with scandal-ridden companies.
June of 2002 witnessed his appointment by a bankruptcy court to supervise WorldCom - now MCI - in the largest bankruptcy in history. Recently, federal regulators appointed him corporate monitor for KPMG. The Big Four accounting firm reached a $456 million settlement with federal prosecutors looking into the firm's questionable tax practices, which avoided an indictment being brought against the company.
Breeden was not willing to disclose whether he is starting a hedge fund, but he told the Times that he would complete the job he started at KPMG.
Marketing documents indicated that Breeden Partners would get a 2% management fee and receive 20% of the profits. With a compensation package like that - while the industry norm - it means that Breeden can make more as a manager than a monitor. That's provided he can push companies into improving their performance.
Breeden's sudden entrance into the hedge funds surprised many of his colleagues.
Arthur Levitt, the former SEC director who followed Breeden as commission chairman, said, "Richard is a multifaceted kind of guy. He can probably do anything he sets his mind to."
Others were not as gracious, saying that making money from a turnaround is harder than fixing the company. Levitt declined to speculate if Breeden would be an effective manager. When asked if he would invest in the fund he responded with "that's a totally different question."
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.