They redeemed 90 percent of their money because they thought everyone else was going to redeem for that reason.
Clients have requested to redeem more than 90 percent of the $ 3.2 billion the fund of hedge funds managed around the time of the arrest in late August, according to three people familiar with the situation. The redemptions would leave the 22-year-old firm less than $ 150 million by year-end, assuming no investors change their mind, according to one of the people with direct knowledge of the situation…
“The biggest reason people pulled wasn’t to penalize them for the personal transgression. It was more that everyone else might get out,” said a person familiar with the firm and its investors. “‘Let’s not be the last one to leave’ was the mentality.” Others wondered if the business would survive. “If the redemptions come as projected, this will call into question the ongoing viability of Common Sense,” said another person who has tracked the situation closely, referring to the difficulty of running an asset management firm with such a small amount of client capital and fee revenue. “Even if you still believed in the investment strategy and had no problem with the extracurricular activities of the founder, you still need people there. I don’t see how they come out of this.”
Investors flee fund after founder’s prostitution bust [CNBC]
Tags: Common Sense Investment Management, Jim Bisenius, oh okay, prostitutes, rationales, Redemptions