NEW YORK (HedgeWorld.com)–Morgan Stanley’s Institutional Hedge Fund of Funds LP was hit with a double whammy in 2002 from investments in Michael Lauer’s Lancer Partners Fund LP and Beacon Hill Asset Management LLC’s Safe Harbor Fund, according to regulatory filings.
As a result, Morgan Stanley wrote down the value of its investment in the long/short equity Lancer fund to zero and sued, according to the filing. But Morgan apparently is letting the Securities and Exchange Commission deal with the Beacon Hill mortgage-backed securities arbitrage fund, because it mentioned no Morgan Stanley lawsuit in its filing, but noted the SEC’s November lawsuit. The SEC sued Beacon Hill for allegedly misreporting returns to investors. Previous HedgeWorld Story The firm eventually liquidated.
The fund, a privately sold but SEC-registered fund, is managed by Morgan Stanley Alternative Investment Partners LP, West Conshohocken, Pa. A Morgan Stanley spokesman declined comment. Mr. Lauer couldn’t be reached for comment.
Regarding Morgan Stanley’s suit, the financial giant wants the courts to force the Lancer fund, without naming the fund directly, to disclose its books and records, and produce audited financials, according to the filing. “We will continue, along with legal counsel, to consider the other rights and remedies available to us regarding this investment,” said Jerome B. Baesel, managing director and portfolio manager for the fund, in an investor letter contained in the filing.
Problems at Mr. Lauer’s funds were first made public last year by a New York Post columnist who in January described Lancer’s offshore fund as invested in illiquid penny stocks, and unable to meet liquidations with cash payouts. Instead, the fund was meeting redemptions with stock. And according to a Bloomberg story, investors were set to redeem 29% of the Lancer Offshore Fund’s assets this year, based on what Mr. Lauer said to investors in a conference call.