Sandell Starting Mutual Fund to Target Smaller Investors
By Miles Weiss | Aug 21,
2014 11:45 AM ET
Thomas Sandell, a hedge-fund manager who makes merger-related bets and
once worked alongside the late Ace Greenberg at Bear Stearns Cos., is
preparing to invest for smaller investors.
Sandell Asset Management Corp. is setting up the Castlerigg Equity
Event and Arbitrage Fund, a mutual fund that will invest in companies
undergoing “extraordinary events” including mergers, takeover bids,
spinoffs and restructurings, the firm said in a
last week with the U.S. Securities and Exchange Commission. The
minimum initial investment in the fund will be $2,000 for retail
investors and $25,000 for institutions.
Sandell, 53, who has run his own hedge funds for more than 16 years,
focuses on activist investments as well as those driven by events such
as mergers and acquisitions. He teamed up with
in 2006 to spur a turnaround at ketchup maker H.J. Heinz Co. Like
other hedge-fund managers who traditionally catered to wealthy
individuals and institutions, Sandell is now turning to mom-and-pop
investors as a new source of capital.
Sandell didn’t return a telephone call seeking comment on the fund.
The number of takeovers has surged this year, with some $1.9 trillion
of mergers and acquisitions announced globally, a 65 percent increase
from the same period in 2013. Should this pace continue, it will be
the busiest year for deals since 2009.
The heightened deal flow can benefit managers such as Sandell who
engage in risk
a trading strategy that involves buying shares in the target of a
takeover after the transaction has been announced. The goal is to
profit when the target company’s shares trade at a discount to the
announced price, reflecting the possibility that a deal might fall
through, and when competing, higher bids emerge.
The “risk” in risk arbitrage came to the fore on Aug. 5, the day after
two proposed mergers unraveled and the tax treatment for a third was
reassessed. More than $20 billion was erased from the market value of
four of the companies involved: Time Warner Inc., Sprint Corp.,
T-Mobile US Inc. and Walgreen Co.
The Castlerigg fund will normally trade in publicly announced
transactions and “not engage in speculation on rumors,” according to
the Aug. 15 filing. Sandell will have the latitude to invest in
transactions it believes will take place but haven’t been announced.
It can also pursue activist investments, such as the one Sandell made
last year in
Bob Evans Farms
Inc. (BOBE), and can put as much as 10 percent of its
assets into bonds, including corporate debt and U.S. Treasuries.
The Castlerigg mutual fund will have a global perspective on
event-driven trading, providing investors with exposure to
that are “less efficient” than U.S. markets in the areas Sandell
targets, according to the registration statement.
A native of
Sandell received a bachelor’s degree from Uppsala University north of
and an MBA in finance from
Business School in
He worked as an analyst at Paris-based Atlantic Finance and head of
equity research at Group Delphi, then in 1989 joined Bear Stearns,
which hired Sandell to start a proprietary risk-arbitrage operation
that would focus on international deals. He was a colleague of
Greenberg, the former chairman and chief executive officer of Bear
Stearns who died in July at 86.
Sandell left Bear Stearns to open his own hedge fund in 1998 and built
up assets of more than $7 billion, only to see investors withdraw much
of their capital after his performance sagged during the 2007-2009
recession. Sandell’s assets under management totaled about $1 billion
as of Dec. 31, according to the firm’s latest investment adviser
report, about the same as the amount it oversaw when it registered
with the SEC in May 2010.
To contact the reporter on this story: Miles Weiss in Washington at
To contact the editors responsible for this story: Christian
firstname.lastname@example.org Josh Friedman, Sree Vidya
©2014 Bloomberg L.P.
All Rights Reserved