Kingdon Capital Management, Mark Kingdon’s $4.6 billion hedge fund firm, has amended the investment terms for both of its funds, eliminating an early redemption penalty that punished investors for taking money out after they had already been in the fund for more than a year.
Previously, Kingdon charged investors a 5% fee to redeem any investments they made in the firm’s funds for the first year of those investments, and then levied an additional 3% fee for any redemptions made in the second year. The firm formally eliminated that 3% fee for all of its funds, according to an April 22 letter from portfolio manager Michael Pohly to investors in the firm’s Kingdon Credit Master Fund. The changes apply to both Kingdon Credit and Kingdon Associates, the firm’s long-short global equity strategy which has produced an annualized gain of 19% since its inception. A person familiar with the fund said the firm decided to cut out the second-year redemption penalty because it was not effective in retaining investors. The firm will keep the 5% penalty for redemptions made in the first year.
Kingdon will continue to offer investors 90 days’ redemption notices for the credit fund and 30 days’ notice for the equity strategy, with no gates or side pockets.
Kingdon Credit, which manages $136 million, is up 8.8% through April, largely driven by long exposure to global financials and energy. Kingdon Credit invests in corporate bonds, credit default swaps, convertible bonds, bank loans and other credit and equity securities. Pohly, Morgan Stanley’s former head of global proprietary fixed-income trading, joined Kingdon in January 2009 to oversee the fund. From its October launch through the end of 2009, it was up 7.5%.
Despite the global economic recovery gaining momentum, and free cash flow generation remaining strong, Kingdon is still wary.
“There are a number of risks manifesting themselves in the credit market that have given us some pause and caused us to reduce our net long position over the past few months,” Pohly wrote.
Kingdon is concerned about sovereign fiscal risk, citing Greece in particular. Pohly will also add short positions on sovereign rates and spreads.
—Suzy Kenly
