When – and how – hedge funds hide April 19, 2018 Michelle Celarier Uncategorized Leave a comment In Iceland, nothing captures the island nation’s psyche more than Thingvellir National Park, a geologic wonder of steep cliffs above a valley where streams spill into a wide lake, all carved from shifting tectonic plates. Iceland’s first general assembly was established on this soil in 930; almost 1,000 years later, in 1928, the area was proclaimed a “protected national shrine of all Icelanders.” Today a visitor might encounter a wedding ceremony in its rift valley. But Thingvellir is not just Iceland’s greatest national treasure. It’s also the name of a shell company created by a U.S. hedge fund for the sole purpose of buying the country’s defaulted bank debt shortly after the 2008 financial crisis — a crisis that brought Iceland to the brink of ruin. Thingvellir Fund, incorporated in Delaware, and Thingvellir SARL, based in Luxembourg, were the onshore and offshore names of two of several secretive funds created by Seth Klarman’s $30 billion Baupost Group and named after famous Icelandic towns and landmarks that disguised a $3.7 billion Baupost investment More recent events have revealed that Baupost’s use of shell companies isn’t unique to Iceland. The Boston-based hedge fund used a similar obfuscation strategy while investing in now-defaulted Puerto Rico debt. Through a series of shell companies — Decagon Holdings 1 through Decagon Holdings 10 — Baupost kept its holdings highly secret until last fall, The Puerto Rico revelation brought Baupost’s strategy to the forefront of a raging debate over the morality of such investments, with the hedge fund’s secrecy a truncheon used by the activists seeking debt relief. Here’s my two-part Institutional Investor series that explores this issue in depth, looking at Baupost in Iceland and Puerto Rico, and Paul Singer’s battles with both Peru and Argentina. https://www.institutionalinvestor.com/article/b17t99npw9smz1/how-hedge-funds-hide https://www.institutionalinvestor.com/article/b17tt5rp63wvgp/when-hedge-funds-hide https://michellecelarier.com/2018/04/19/when-and-how-hedge-funds-hide/
I absolutely agree with these hedge funds for hiding their identity. Their investment is not like yours and mine, merely thousands or at most ten's of thousands of dollars; their investment is in the billions of dollars. Big money attract big attention, unwanted attention especially when their investment strategy is not ones that everyone can understand or appreciate under those misplaced "nationalism". It's not like they are doing anything illegal. They are paying taxes. What do you care where they invest and how they invest your money? People really need to mind their own business. And I can't believe people call those funds as "vulture funds". To me they are more like white knight rescue funds. It's not like those hedge funds caused the fall under of those defaulted debts and yet the whole country didn't even have money to bail them out, those hedge funds were the first one there and provided them the relief. So what if those hedge funds did it out of their self-interest? Isn't this the back-bone of capitalism? If Baupost hadn't gone in to have bought the defaulted bank debt, Iceland, the ENTIRE COUNTRY would've gone under, GONE, wiped off the surface of the earth because even the country of Iceland had no money to bail out these banks. So the country would've been broken into pieces and sold to the highest bidder to pay off the debts. Is that what those Icelanders would've preferred? And then what would they have wanted for a buyer IF they had any choice to choose? Well funded global terrorists? Regimes with despotic and corrupt leaders? Or countries ruled by absolute autocratic rulers who have one ambition and only one ambition which is world domination? And they think they would still be able to see their beloved liberal and democracy ideals upheld by one of those buyers? LOL And even on the buying part, at least when those hedge fund bought all the defaulted debt, they didn't ask Iceland to chop off part of their land or give away an island or a seaport unlike some country? . All those hedge funds want is just some privacy from fear-mongering, pitchfork-wield village idiots who would never understand appreciate their intention which ironically is the precise reason why those hedge fund wanted privacy in the first place. And Baupost is lucky at least their investment in Iceland is paying off. Iceland is recovering, Baupost is earning a nice profit on the defaulted debt. What about the hedge funds who bought the debt of Puerto Rico and Argentina? They were literally left holding the bag losing ALL their investment as these two countries were allowed to declare bankruptcy which is basically telling any debtors to kiss their a$$. If those hedge funds had continued to stay anonymous instead of coming out to claim their fair share, there would've been no objection to them having their identity shielded, is there? Well unfortunately you can't have your cake eat it too. If you loathe them being able to profit while staying hidden and wish they are more transparent well then you can't blame them when they become more transparent when staking claim for the payment for the debts that they hold. And lastly those anonymity can stay effective only for so long anyway. At the end, people still find out. So much for hiding, shell companies, off-shore, on-shore, at the end, every single shell company that owns which, registered where, domiciled where are clearly listed for every single hedge fund mentioned in the article. So what's the big deal? Everything is still known. All in all, people are just jealous of money. They can't make it and they are always jealous of those who can.