Seekingalpha.com – Bill Ackman explains how hedge funds work, specifically with regard to investors in Pershing Square IV, his fund dedicated (disastrously) to going long Target.

Some of these investors, who are for the most part other hedge funds (that comprised approximately $1.3 billion of the original $2 billion of fund capital), have told me that they previously hedged a substantial portion, or in some cases 100% or more, of their exposure to Target through PSIV.

So a bunch of hedge funds invested in PSIV to go long Target (while paying Ackman his 2-and-20), and at the same time went short Target in order to hedge their PSIV exposure. And for this piece of genius they charge their own investors 2-and-20.

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Tags: bill-ackman, genius, investors, pershing square, psiv, regard, substantial portion, target

New York (HedgeCo.Net) – New York University scored a victory yesterday, when they won a court order that sought an extension on a temporary ban that would halt J. Ezra Merkin from making any more transfers with the school’s funds.  Merkin had millions of dollars of the University’s funds tied up in investments with Bernard Madoff.

Merkin, the man behind the Gabriel Capital LP fund and the Ariel Fund Ltd., is prohibited from withdrawing, transferring or liquidating assets, after a ruling from Supreme Court Justice Richard Lowe in a Manhattan courtroom yesterday.

According to the original complaint filed by NYU in late December, Merkin “was explicitly told” to stay away from Madoff related investments.  Merkin then allegedly invested with Madoff regardless of the orders, losing an estimated $24 million of the University’s funds with the Ponzi-schemer.

"In the face of an extraordinary number of red flags, Merkin, for years, simply turned over a substantial portion of Ariel’s funds to Madoff for management,” NYU alleges.

The University, who had $94 billion total invested with Merkin, fears that it may lose the entirety of its investment.

“Mr. Merkin has always acted in good faith and did not deceive NYU or any other investors,” said Andrew Levander, Merkin’s lawyer.

Gabriel Capital, which manages about $1.5 billion but posted losses of 39 percent in 2008, was planning to liquidate amidst the aftermath of the Madoff debacle, along with Ariel, but must have permission from the courts to do so first.   

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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Tags: accredited-investors, andrew levander, ariel, bernard madoff, courtroom, debacle, ezra, good faith, hedgeco, justice richard, merkin, new-york-university, nyu, red-flags, richard lowe, sister-sites, substantial portion, supreme court justice