Millennium Partners is opening the redemption floodgates to let out unhappy investors, a move that could cost the firm as much as $4 billion in capital. Investors who stick with the firm will benefit from friendlier liquidity terms, an effort by Millennium to keep them from lobbing in preemptory redemption requests.
The firm will allow any investors in its quarterly share classes with September 30 redemption requests to be paid in full, opening the gates that were triggered in late 2008 when investors inundated Millennium with billions of dollars in withdrawal requests. But investors may well be inclined to change their mind: This year, Millennium’s offshore fund was up 9.76% as of August 13, and the fund has had an annual return of 14.98% since its launch in December 1997.
Investors are being offered the choice to remain in their current share classes with revised terms or to move into one of two new share classes whose gates are based on investor, not firm, capital.
Investors in Millennium’s quarterly share classes that choose to stay put will see the classwide limit for asset redemptions raised to 17% of firmwide capital per quarter, up from previous gates of between 8% and 10%. Alternatively, investors will be able to choose between two new share classes. The first will provide quarterly liquidity and allow for redemptions of as much as 25% of an individual’s net asset value, while the second will provide annual redemptions of up to 100% of investors’ individual net asset values without any penalties or limits; all new capital must go into the newer share classes.
Despite losing a mere 3.07% in 2008, Millennium was hit with $5 billion in redemption requests between the end of 2008 and the first quarter of 2009 as investors took advantage of the firm’s easy liquidity terms for some. As a result, Millennium’s gates were triggered, locking in those investors with quarterly liquidity but not a smaller group who could redeem. And many did: The firm’s assets fell to $11.47 billion on January 1 from a peak of $14.21 billion on July 1, 2008. This July, Millennium had $10.5 billion.
Millennium staved off some redemptions by outsourcing administration of all its funds, which kept Switzerland’s Union Bancaire Privée from taking $1 billion out of Millennium. UBP’s push was in response to its losses in Madoff, who infamously did not use an outside administrator.
Even so, Millennium still faced almost $4 billion in lingering redemptions—including requests from investors simply looking to hold themselves a place in the line for the exit, just in case performance deteriorated.
Millennium anticipates the amount investors actually end up pulling from the firm in September will be well below the amount of redemption requests. An individual close to the firm says that many investors have cancelled redemption requests. A spokesman for Millennium declined to comment.
--Britt Erica Tunick
