03/27/2013

Sycamore Lane Cuts Fees to Attract New LPs

 

A year after launching with $20 million of seed money from Maverick Capital, Sycamore Lane Partners has lowered its management and performance fees in a bid to attract additional investors.

At the end of February, Sycamore Lane was managing $22.7 million in its Cayman Islands-domiciled Sycamore Lane Offshore Fund and a U.S.-domiciled companion, Sycamore Lane Fund. The slight increase in assets under management since the funds’ April 2, 2012, inception was all performance-driven. Maverick remains the only outside investor.

That’s why Sycamore Lane is now offering a new share class that would charge limited partners just 1.25% of assets and 12.5% of gains. The original share class carries a 1.5% management fee and 20% performance fee. It’s unclear what investor concessions, if any, the New York firm is seeking in exchange for the discounted fees. The original share class has a one-year “soft lockup” with a 3% penalty for early withdrawals.

Sycamore Lane intends to offer the new share class for a few months, with the aim of raising enough fresh capital to boost overall assets to more than $50 million. For now, the firm isn’t likely taking in enough fee revenue to cover operating expenses. The manager initially wanted to charge a 2% management fee, but in December lowered the charge to 1.5% for the original share class.

Sycamore Lane represents the first fund launch backed by Maverick, which in 2011 allocated $100 million of partner money to seed startup managers and provide “acceleration” capital to more-established firms. It also has invested in Rinenhart Capital, a Nashville fund operator founded in 2007 by Andrew Cunagin. Maverick apparently plans to establish a track record by backing three more managers, then raise outside capital for a fund that would invest in hedge fund firms.

Sycamore Lane manages a long/short equity portfolio focused on North American companies. The offshore fund was up 8.1% from inception through Feb. 28. Its 2012 gain amounted to just 2.3%. But the Sycamore Lane vehicle is off to a stronger start this year, posting a 5.6% gain in the January-February stretch.

The funds are managed by James D’Angelo and Cregg Watner, who previously worked together at Elm Ridge Capital of Irvington, N.Y. Also on board is senior analyst Khoi Tran, another Elm Ridge alumnus, and chief financial officer Trevor Cohen, formerly of Springbok Capital.

CORRECTION (4/10/13): This article has been corrected. The original version misidentified a Nashville firm that received backing from Maverick Capital. It is Rinehart Capital, founded in 2007 by Andrew Cunagin.

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