Just when you think things have to start settling down for Bruce Berkowitz and the Fairholme Fund you learn this:
Effective Oct. 17, 2011, Charles M. Fernandez has resigned as an officer and employee of Fairholme Capital Management, L.L.C., and as a director and an officer of Fairholme Funds, Inc. References to Mr. Fernandez in the Prospectus and Statement of Additional Information are hereby deleted.
http://www.sec.gov/Archives/edgar/data/1096344/000091957411005618/d1235500_497.htm
Just who is this co-manager Fernandez. Fortune wrote an article on Fairholme about a year ago:
Over lunch at a small Italian restaurant in Coral Gables in November, Berkowitz takes a call from activist hedge fund manager Bill Ackman of Pershing Square Capital in New York City. Ackman is congratulating Berkowitz on the day's news: General Growth Properties, the country's second-biggest mall owner, has officially emerged from bankruptcy after a year and a half under court supervision.
The call lasts only a minute, and afterward Berkowitz asks Fernandez how much Fairholme shareholders are making from their investment in GGP. Fernandez quickly responds: $1.4 billion. It's a huge return, and, as Berkowitz quickly says, it wouldn't be possible without Fernandez.
Fernandez, 48, joined Fairholme in 2007, shortly after marrying Berkowitz's cousin. To outsiders it smelled of nepotism, but Berkowitz says he had been looking for someone like Fernandez for a long time. Even though Fairholme posted 20% annualized gains in its first five years, by 2005, with the fund at $1.5 billion in assets, Berkowitz thought it needed a change. He wanted someone with the right experience to help him branch into opportunities outside public securities. Fernandez was a restructuring whiz who had worked at companies controlled by pharmaceutical billionaire Phillip Frost. Soon after Fernandez's arrival, Pitkowsky and Trauner left Fairholme. Berkowitz then changed Fairholme's charter to allow the fund to invest in debt for the first time and take larger stakes in companies. Shortly thereafter Berkowitz insisted that Fernandez move into the house next door to his, the better to work on deals.
Their biggest project so far has been General Growth Properties, and it's a good example of the types of transactions Berkowitz wants to do more of. Soon after the largest real estate bankruptcy in history made headlines in April 2009, Berkowitz and Fernandez began reading through the court filings. Aided by a veteran bankruptcy lawyer in New York, they determined that some of the company's battered debt could be paid off with the rent checks still coming in. Fernandez called more than 100 holders of GGP bonds and made bids over the phone. After six weeks he had accumulated bonds with a face value of $1.8 billion.
At that point Ackman, who had acquired a huge equity position in GGP, and property owner Brookfield Asset Management invited Fairholme to join them in recapitalizing the company's stock. "We set it up so there was room for others, and Bruce was my first call," says Ackman, who made a huge return when the stock rose from 50¢ to more than $15. "The guy is the most stand-up investor I've ever worked with."
So let’s sum up the year so far for Berkowitz:
- Assets cut in half
- Huge, I mean huge concentrated bet on financials going badly
- 18% of fund in the smelly AIG
- Owns controversial Goldman Sachs
- Bank of America a core position
- Has public showdown with David Einhorn over St. Joe
- After having his prior two co-managers leave and bringing in Fernandez who is connected through family members, Fernandez now leaves
What a year.
Effective Oct. 17, 2011, Charles M. Fernandez has resigned as an officer and employee of Fairholme Capital Management, L.L.C., and as a director and an officer of Fairholme Funds, Inc. References to Mr. Fernandez in the Prospectus and Statement of Additional Information are hereby deleted.
http://www.sec.gov/Archives/edgar/data/1096344/000091957411005618/d1235500_497.htm
Just who is this co-manager Fernandez. Fortune wrote an article on Fairholme about a year ago:
Over lunch at a small Italian restaurant in Coral Gables in November, Berkowitz takes a call from activist hedge fund manager Bill Ackman of Pershing Square Capital in New York City. Ackman is congratulating Berkowitz on the day's news: General Growth Properties, the country's second-biggest mall owner, has officially emerged from bankruptcy after a year and a half under court supervision.
The call lasts only a minute, and afterward Berkowitz asks Fernandez how much Fairholme shareholders are making from their investment in GGP. Fernandez quickly responds: $1.4 billion. It's a huge return, and, as Berkowitz quickly says, it wouldn't be possible without Fernandez.
Fernandez, 48, joined Fairholme in 2007, shortly after marrying Berkowitz's cousin. To outsiders it smelled of nepotism, but Berkowitz says he had been looking for someone like Fernandez for a long time. Even though Fairholme posted 20% annualized gains in its first five years, by 2005, with the fund at $1.5 billion in assets, Berkowitz thought it needed a change. He wanted someone with the right experience to help him branch into opportunities outside public securities. Fernandez was a restructuring whiz who had worked at companies controlled by pharmaceutical billionaire Phillip Frost. Soon after Fernandez's arrival, Pitkowsky and Trauner left Fairholme. Berkowitz then changed Fairholme's charter to allow the fund to invest in debt for the first time and take larger stakes in companies. Shortly thereafter Berkowitz insisted that Fernandez move into the house next door to his, the better to work on deals.
Their biggest project so far has been General Growth Properties, and it's a good example of the types of transactions Berkowitz wants to do more of. Soon after the largest real estate bankruptcy in history made headlines in April 2009, Berkowitz and Fernandez began reading through the court filings. Aided by a veteran bankruptcy lawyer in New York, they determined that some of the company's battered debt could be paid off with the rent checks still coming in. Fernandez called more than 100 holders of GGP bonds and made bids over the phone. After six weeks he had accumulated bonds with a face value of $1.8 billion.
At that point Ackman, who had acquired a huge equity position in GGP, and property owner Brookfield Asset Management invited Fairholme to join them in recapitalizing the company's stock. "We set it up so there was room for others, and Bruce was my first call," says Ackman, who made a huge return when the stock rose from 50¢ to more than $15. "The guy is the most stand-up investor I've ever worked with."
So let’s sum up the year so far for Berkowitz:
- Assets cut in half
- Huge, I mean huge concentrated bet on financials going badly
- 18% of fund in the smelly AIG
- Owns controversial Goldman Sachs
- Bank of America a core position
- Has public showdown with David Einhorn over St. Joe
- After having his prior two co-managers leave and bringing in Fernandez who is connected through family members, Fernandez now leaves
What a year.
