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March 29, 2005 at 07:00 PM
FRANKFURT, Germany (HedgeWorld.com)–Investors in Phoenix Kapitaldienst GmbH looking to recover their money find themselves steered toward telephone recordings that urge patience.
Problems at Phoenix leaped into the news when a German court on March 14 opened preliminary insolvency hearings regarding the hedge fund manager at the request of that country’s securities regulator, Bundesanstalt f
r Finanzdienstleistungsaufsicht, or BaFin. The municipal court of Frankfurt banned any transactions that didn’t have the approval of the preliminary insolvency administrator, Frank Schmitt, of the law firm of Schultze & Braun.
Although this looks like a hedge fund meltdown, such a term must be employed with some care, because Germany has only welcomed hedge funds, properly speaking, since implementation of the Investment Modernization Act, a little more than a year ago.
A spokesman in BaFin said that Phoenix isn’t a hedge fund in the sense of the new law and has been around since 1992. “It does business in a way that’s quite similar to a hedge fund,” he said, but it is classified as a securities trading bank.
“They have a new management, and they came to BaFin and said that they had a problem with money,” he added, summoning the traditional German facility for understatement. Management change came about because the founder of Phoenix, Dieter Breitkreuz, died in an airplane accident last year.
The firm of Schultze & Braun has set up phone lines in which investors can hear a pre-recorded explanation–one taped in German, another in English. The explanation proves to be in large part a call for patience–it may be 8 to 10 weeks before the administrator can start processing requests for reimbursement. The court’s proceedings are designed “to ensure that whatever assets are still in existence will be made available to all creditors equally,” and to allow the efficient pursuit of that goal, investors and creditors in general are urged not to try to reach the administrator by phone.
