05/23/2012

Dyson Shutting Small-Cap Activist Fund

John Dyson’s Millbrook Capital is unwinding an activist hedge fund that produced solid returns over 15 years by targeting small-cap companies.

The vehicle, MMI Investments, is on track to return outside capital by June 30. At that point, Millbrook would revert to its original charter as a family office for Dyson, a veteran private equity player who is perhaps best known for creating the “I Love New York” tourism campaign while serving as state commerce commissioner in the 1970s. Clay Lifflander, a longtime partner of Dyson and portfolio manager of MMI Investments, apparently plans to move on.

The fund began investing in 1996 with backing from Dyson and Lifflander, as well as “friends and family” money. In 2002, Millbrook started accepting capital from outside investors, and the vehicle peaked around $700 million before the financial crisis. The fund generated a 20-25% average annual return, including 80% in 2009, by taking minority stakes in small and mid-size companies. Among its successes: pushing for the spinoff of Brink’s Co.’s security alarm business in 2008 and backing the sale of EMS Technologies to Honeywell last year.

Although MMI faced a fair amount of withdrawals during the financial crisis, the fund continued to enjoy the backing of a number of longtime investors. The decision to shutter the vehicle was based on Dyson’s desire to focus on his personal investments.

Among those who plan to stay on at the New York firm are general counsel and chief financial officer Alan Rivera and analyst John Powers. Craig Rosenblum, vice president of research, and assistant portfolio manager Jerome Lande already have departed. Rosenblum and Lande plan to team up on the launch of an activist fund operation dubbed Coppersmith Capital.

In addition to serving as state commerce commissioner, Dyson was a deputy New York City mayor under Rudolph Giuliani. His other business interests include DKM, a private equity firm founded by his father, Charles Dyson, in the 1950s, and Millbrook Winery in New York’s Hudson Valley region.

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