Hedge fund firm Basswood Partners, which returned most of its outside cash to investors four years ago, is taking new deposits, according to a person briefed on the matter.
The firm, which bets on rising and falling stock prices, gave back almost $1 billion in June 2006 after a clash with clients over performance expectations, according to the person, who asked not to be named because the fund is private. COO Marc Samit declined to comment.
Basswood, run by twin brothers Matthew and Bennett Lindenbaum, began planning to seek fresh money about eight months ago, and considered using third-party marketers, the person said. The firm instead earlier this month hired Jim Sheehan, who had worked at Ivy Asset Management and Brencourt Advisors, to head the effort.
Investors putting in cash will be offered a fee structure that rewards long-term commitments, the person said. Hedge funds are cutting fees after $286 billion in net withdrawals in 2008 and 2009, according to data from Hedge Fund Research Inc. Firms took in $23.3 billion in the first half of this year, data from Hedge Fund Research show.
Basswood, which oversees about $400 million, will charge a 1.5% management fee on new deposits, compared with the industry standard of 2%, according to the person.
Investors will pay 10% of annual gains as a performance fee if they lock up their money for three years, instead of the traditional 20%. That levy climbs to 15% for those who commit for two years and to 20% for customers who need 90-day access to their cash. The investment minimum is $2 million.
Basswood started in 1994 and didn’t have a losing year until 2008, when it declined 7.5%, according to the person familiar with the firm’s plans. It returned 12.5% in 2009 and about 1 percent this year through Aug. 31. At its peak in early 2006, the firm managed more than $2 billion.