03/23/2011

Deccan Value Vehicle Rises From the Ashes

A co-founder of Deccan Value Advisors, a once-$1.5 billion hedge fund operator that wound down in 2009, has relaunched the business.

The Greenwich, Conn., firm, now known as Deccan Value Investors, has quickly raised some $400 million since chief investment officer Vinit Bodas began trading again last year. Word has it Deccan Value Investors Fund has regained favor among some of the big institutional investors that backed the original fund.

Bodas is telling prospective investors that the new fund's strategy is the same as the predecessor vehicle, Deccan Value Advisors Fund. Deccan was known for taking highly concentrated, long-only positions in up to 10-12 companies. The manager occasionally used shorting to hedge its bets.

In 2009, co-founder Paul Korngiebel, who previously worked with Bodas at Brandes Investment Partners of San Diego, announced his intention to leave the firm. The remaining partners decided it didn't make sense to buy Korngiebel out and instead proceeded to unwind the fund.

That vehicle posted a gross cumulative return of 47% from its inception in 2004 to its liquidation in August 2009. The fund gained 57% during its first three years, then fell 10% from August 2007 to August 2008. It was flat during its final year of trading.

Bodas launched the successor vehicle in April 2010 with $13 million. Deccan Value Investors Fund posted a net gain of 8% last year.

It's unclear why Korngiebel chose to leave Deccan when he did, but a source close to the firm insisted it had nothing to do with performance issues during the financial crisis. Through the downturn, Deccan deployed $400 million of dry powder to buy beaten-down stocks, the source said.

But one bet went south: In October 2008, Swiss freight company Panalpina World Transport acknowledged that employees had paid bribes in Nigeria to win business. Deccan suffered “substantial losses” on its Panalpina position and subsequently sued the company for fraud. The lawsuit was settled in September 2010 for an undisclosed sum.

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