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Tuesday, June 10, 2003

A New Fund Idea

by: Sean Hanna, Editor in Chief

A mystery fund is readying itself for business. The new fund -- dubbed the "ABC Fund" in a prospectus filed with the SEC this week -- is the first offering of an investment management firm founded in April by Howard Horowitz. The name of the new firm is H Team Capital. The initial fund will focus its investments on companies with weak corporate governance where the portfolio manager can force corporate reforms.

Essentially, the fund seems to be trying to capitalize on the current concerns about how American companies are being run. If so the fund would appear to be taking a page out of the book authored by Mutual Shares' Michael Price. Still the details of the fund manager's objectives are sketchy since the firm cannot comment beyond the prospectus.

The prospectus confirms that the fund will be sold without commissions, although it will charge an as yet undefined 12b-1 fee. Also not yet disclosed are the funds management fees and the firm's providing its basic services such as fund accounting, transfer agency and custody. The fund's legal counsel is Paul, Weiss, Rifkind, Wharton & Garrison.

The fund plans to profit by "acting as a catalyst for positive change in the management and operation of the companies in which it invests," according to the prospectus. It will invest in companies H Team Capital believes are in need of "remedial action designed to put management's interests in line with the investors interests."

Because the fund seeks to profit by turning around operations of companies in which it invests, H Team Capital believes that they will be able to deliver positive returns even when the broader markets are flat or negative.

Still, the fund will face significant hurdles. There is no mention in the prospectus of any seed funding for the fund. Without significant capital, the fund is unlikely to buy enough shares in targets to gain the ear of senior management and the board. Money is not the only item that separates this fund from Michael Price's -- it also lacks a track record.

Founder Horowitz -- the only employee of the advisor named in the prospectus -- is a former portfolio manager with Lipper & Company and more recently the head of merger arbitrage research at American Securities BD Company. Founder Kenneth Lipper shut Lipper & Co. down last December after steep losses in some of that firm's investment portfolios.  

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