Insana Capital doesn’t leave ’em laughing

A lingering death. And who shared the fees?

News the Bobbleheads forgot to pass along

Ron Insana’s bid to quietly slip the surly bonds of his excellent adventure in fund of hedge funds management for the waiting — start date: Sep. 2 — sinecure at SAC Capital Advisors LLC may not go smoothly. His Aug. 8 “I’m outtahere” note also announced the immediate suspension of redemptions to allow “equal treatment of investors while the general partner” — Ron, wearing his managing member of Insana Capital Holdings LLC hat — “considers the future operation of the partnership.”

Suspended redemptions? “Due to the lockups and withdrawal terms of the underlying funds, liquidation is expected to take a substantial amount of time, likely to be a year or longer.” Try more than two, barring charitable acts on the part of certain underlying managers, including one SAC Capital Advisors LLC.

But surely you won’t be charging fees while you consider “multiple options...including dissolution of the partnership” while having those “discussions with several highly qualified investment managers who are interested in assuming the investment management responsibilities for the partnership?” Hmmmm. That bit seems to have missed the cut.

So the investors who bought into the Legends Fund, “an expression of the firm’s macroeconomic outlook as guided by Ron Insana?” “I will continue to make myself available for your questions and will continue to provide guidance to the business...It has been an honor to do business with all of you over the last 14 months...As I move on to new responsibilities, I hope that I may serve you in the future.” Gee Ron, we won’t let the door hit us on the way out. Oh, hang on, we’ll be whistling for our money in 2011 while you’re buffing Stevie’s whatever. Nice. 

Questions? Some he will likely face:

After the jump:

Read the ‘Dear Investor’ Letter

See the Legends Fund Jul. 2008 report

See the 2007 Financial Statements

• Why the fund, which had a two-year lockup, allocated to several hedge funds that demanded even longer lock-ups. According to the Jul. 2008 performance report, the fund had 16 per cent of its assets in funds with lockups for more than two years, including 6.4 per cent in SAC Multi-Strategy Fund LP. (Another 25 per cent was in funds offering only annual liquidity).
• And, perhaps more intriguingly, whether Insana’s management company had an undisclosed fee-sharing arrangement with a leading financial institution. The concern among investors, and consequent muttering about lawyers at dawn, is that the arrangement, if it existed, would limit Insana’s ability to run his business profitably, which was obviously a challenge and doubtless contributed to his decision to take the SAC shilling.

Another source, who provided NakedShorts with the fund documents, commented:

As they say - follow the money. Where did Insana get the seed capital to start his firm?
Where did the money go?

(No reply had been received by pixel time to an email to that source requesting elucidation on those doubtless rhetorical questions. Likewise, another email sent to Insana’s representatives after business hours inquiring as to the alleged undisclosed fee-sharing, and the reasons for ICP’s sudden withdrawal of its SEC investment advisor registration, had not been returned or otherwise responded to by pixel time. An earlier email, sent over the weekend and asking less specific questions about reports of possible legal action by investors, was acknowledged yesterday morning but not directly responded too.)

Among other possibly interesting factoids:

• Legends was down an estimated 5.4 per cent for the year through Jul. 31, in spite of “stiff economic conditions amid an historic, and global, financial market dislocation,” said Insana, pointing to the S&P 500’s 20 per cent decline over an somewhat different time period as cover for the self-awarded victory lap of a “despite the challenging conditions” modifier.
• “...our current level of assets under management, coupled with the extraordinarily difficult capital raising environment...” made it “imprudent for the firm “to continue business operations.” Of course, the fund’s entirely boring performance — it lost 1.77 per cent in seven months in 2007 — had nothing to do with the “extraordinarily difficult capital raising environment” that, according to the financials, saw additions of just $8.5 million, counting $2.25 million raised in 2007.
• His investors are out roughly 10 per cent over the fund’s life, assuming they paid the 2.5 per cent sales charge.
• The performance record on the Jul. 2008 report claims a gain of 0.44 per cent in 2007. Not the 1.77 loss reported on Page 12 of the financial statement. Details.
• Legends’ administrator was the entirely legendary UBS Fund Services (Caymans) Ltd. Let’s hope they did a better job than when they last troubled these pixels, or Insana’s investors could be in for another nasty surprise.
• It will be interesting to see whether Ron’s in with Steven Cohen gets his investors out of the SAC Multi-Strategy Fund LP ahead of the current schedule, which appears to have a Dec 31 2010 valuation date (annual liquidity after a three-year lockup). A reasonable accommodation, perhaps, given ICP’s $7 million is hardly material to the Cohen weal.
• Insana Capital Partners LP’s website went dark yesterday. Doubtless a less expensive option than removing that now inoperative, but formerly prominent, claim to being an SEC registered investment advisor reported here yesterday.

Insana Capital Holdings LLC: Dear Limited Partner
Aug. 8 2008

Monthly Investor Performance Estimate: Jul. 2008
Insana Capital Partners Legends Fund LP
(Includes a list of underlying funds and allocations)
Aug. 8 2008

Insana Capital Partners Legends Fund LP
Financial Statements & Auditors’ Report
Dec. 31 2007 (Signed Jun. 25 2008)

Earlier on NakedShorts

Insana upgrades, from Fort Lee to Scamford
Aug. 8 2008

Comments

[Michael Comeau]

Excellent work! I'm impressed - why didn't the MSM pick any of this up?

[Timothy Sykes]

Greg, you might be a prick, but this is a quality blog post, good job