Camulos Capital, which spun out of Soros Fund Management five years ago, is liquidating its flagship multistrategy credit fund after years of high-profile problems.
Following a strong start, the firm suffered from a dispute among the founders that evolved into a nasty courtroom battle, and a traumatic loss in 2008 led to the suspension of redemptions and resulted in an investor lawsuit that sought to have the flagship closed.
In a letter to investors dated October 29, founding partner and chief executive Richard Brennan said the firm had begun the complicated process of selling all liquid positions in the Camulos Master Fund.
Camulos was founded in September 2005 when a 12-member credit team, led by Brennan and William Seibold, left Soros with backing from George Soros. Brennan worked at Soros from 2002 to 2005 as a portfolio manager overseeing the credit portion of Quantum Partners. Seibold was a senior analyst at Soros and one of the founding partners of the distressed team. The Stamford, Conn., firm focused on leveraged loans, distressed debt and a basket of other credit strategies. The Camulos Master Fund had a promising start, rising 5.29% in the last two months of 2005 and 25.75% in 2006. Then the fund gained only 3.21% in 2007, compared with an increase of 7.87% for the AR Credit Index. Brennan and Seibold parted ways in June 2007. Seibold formed Noroton Capital Management in March 2008 but then sued Camulos in 2009, claiming that he’d been muscled out of the partnership and that the firm owed him $67 million.
Seibold’s lawsuit alleged that he was the second-largest equity holder in the partnership, but in order to receive his bonus in 2006, he had to sign an agreement that excluded him from the management committee. When he did receive the bonus, it was significantly less than what he was entitled to receive, according to the suit.
Camulos called Seibold’s suit frivolous and countersued, claiming Seibold took proprietary information that he later used to compete against the firm, and that he had used his expense account to finance lavish junkets.
The Camulos flagship fund plummeted 61.81% in 2008, and in October of that year Brennan began restructuring the fund, asking investors to lock up their capital for another 12 months in return for reduced fees. In November 2008, the firm suspended redemptions, and in 2009, while equity markets surged, the fund finished the year down 1.79%. Assets, which peaked at $2.65 billion in January 2008, fell to $930 million by July 2009.
The firm got a temporary reprieve thanks to a court decision in the Cayman Islands. In April 2009, Kathrein & Co., a private bank in Austria, sued Camulos in the Caymans and attempted to force the firm into liquidation to get back its $27 million investment in one of the firm’s offshore funds. The court ruled against Kathrein, noting that less extreme remedies were available.
In an August 2010 letter, Camulos offered investors—some of whom had been unable to redeem since 2008—the option to sell their shares on the secondary market in a Dutch auction managed by Credit Suisse.
Said Brennan in an October letter to investors, “We have finally secured bids for all of the positions in the Camulos Master Fund,” adding that investors will now receive the liquidity that was outlined in the August letter.
