Former SEC Chief Breeden Behind New Hedge Fund Start-Up

by Phillip Morton, Investors Offshore.com

19 September 2005

According to a report in the New York Times last week, the former chairman of the Securities and Exchange Commission, Richard C. Breeden, is in the process of starting up a new hedge fund which will seek to profit from companies that improve upon their record of corporate governance.

Citing individuals familiar with Mr Breeden's plans, the new fund is expected to be up and running on January 1, and is seeking to raise between $500 million and $1 billion in investment capital. The fund will hold large positions in six to twelve companies at a time. The minimum investment is thought to be $5 million, with a two-year lock-in period, charging an industry standard management fee of 2% of assets, and a 20% performance fee.

Mr Breeden is believed to have no experience in investing other people's cash, but has a wealth of experience in working with companies which have been ruined by scandal and issues of corporate accountability. In 2002, he was appointed by a bankruptcy court as a kind of legal custodian over WorldCom - now known as MCI and the largest bankruptcy case in US history - which included resonsibility for the corporate governance guidelines. Mr Breeden was also appointed by federal regulators to monitor big four accounting firm KPMG, which recently reached a $456 million settlement with prosecutors over its role in selling dubious tax shelter arrangements.

Whilst Mr Breeden himself has not commented in the press on his new venture, which has surprised many in both hedge fund and regulatory circles, the fund's promotional literature stated that the fund will "seek quiet reform where possible and become as actively involved as necessary to achieve desired transformations and prevent value-diminishing corporate actions."

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