25/03/2010 Author: Elana Margulies

Moab Partners removes gates and side pockets

Moab Partners, the New York-based event-driven hedge fund started by Perry Capital veterans Michael Rothenberg and David Sackler, has conformed to the increasingly standardised industry practice of removing the gates and side pocket provisions from its fund.

Andrew Stotland, director of business development at the firm, said, “gates and side pockets were originally introduced to protect the limited partners,” he said. “Unfortunately, in 2008, many of our peers abused these investor protections. The investor community fought back and rightly so. We never adopted any of these practices, but we wanted to go one step further. We wanted to remove any doubt from investors' minds and show them that our interests as general partners are truly aligned with theirs as limited partners.”

The practices of gating and side pocketing are becoming relics, no longer generally accepted by the institutional investor class. According to Deutsche Bank's 2010 Alternative Investment Survey, over 60% of investors indicated that fewer than 5% of their managers were still gated, with almost half of these investors noting that none of their existing managers were gated.

Prior to the removal of gating and side-pocket provisions, Moab’s offering memorandum stated it would side-pocket certain illiquid securities to prevent a firesale in the event of a large investor redemption, and would impose gates to limit large redemption requests. The new changes apply to existing and future investors.
Moab Partners returned 0.22% for February, and 1.56% YTD.