First it was Jeffrey Gendell, now it is Michael Zimmerman, whose Prentice Capital Management lost 88% in 2008. Formerly a SAC golden boy, Zimmerman traded retail and consumer with Stevie for 5 years before launching independently in 2005. The 38 year old, who like Gendell thought that the market can never go down, had been trading stocks and bonds, and had about a third of its assets in highly illiquid securities. However with such liquid winners as Gaiam, Russ Berrie and Blockbuster, making up 75% of his stock holdings, who needs enemies. Prentice, which peaked at $2 billion in assets, was at $500 million as November. And the clincher - December performance was down 67% when Mike realized it was time to mark down those worthless second-liens from par (KB Toys, which filed for bankruptcy in December was a major holding. Do they teach anything about fundamental analysis at SAC?).
Brad Balter who runs a Boston Fund of Funds asks rhetorically "How can you raise money when you've destroyed capital to that degree?" We ask rhetorically, how can one run a fund of funds after Bernie, but we digress...
The delusion continues - if Mike is successful in raising capital, there would be two investor share classes: one charging ye olde 2 and 20, with quarterly withdrawal options after a 45 day notice, as well as a 1.5 and 15 option with a full year lock up.
What surprises us is that Mikey hasn't run back to the old master. After all Stevie knows a good investment opportunity when it presents itself, usually minutes ahead of the PR.
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