Goldman Sachs (GS) and the Blackstone Group (BX) may redeem their investments in Harbinger Capital Partners’ flagship after the hedge fund’s founder said he borrowed more than $100 million from another fund to pay his taxes.
Both firms filed redemption notices with the New York-based hedge fund, which has about $9 billion in assets under management. The New York State Common Retirement Fund also plans to pull $41 million from the Harbinger Capital Partners Fund, which is down 15% this year.
Goldman currently has $120 million invested in the $3.4 billion fund.
Falcone took a $113 million loan from the Harbinger Special Situations Fund last October to pay his personal taxes, Bloomberg Markets reported in September. Bloomberg News first reported Goldman’s redemption request, as well. Special Situations is in the process of liquidating after Harbinger suspended redemptions from the now-$2 billion fund.
If Blackstone and Goldman go through with the redemptions—Harbinger requires 90 days’ notice for withdrawals, and either firm could simply be ensuring that they’ll have the opportunity to begin redeeming in January—it will take up to a year for them to get their money back. Harbinger only allows clients to withdraw 25% of their assets per quarter.
Falcone said that Harbinger has “no issues of redemptions.”
“Of course it will,” he told MarketWatch when asked if the fund will be able to meet the redemptions without selling off any investments.
In addition to the rough performance this year and the revelation of the Special Situations loan, some investors are skittish about Falcone’s strategy. The flagship fund currently has some 90% of its assets in wireless and telecommunications investments, including a large number of illiquid positions.