Why do large funds break themselves up?

March 25, 2022 9:18 AM

I was watching the Carl Icahn documentary on HBO and noticed something I've seen before: large funds break themselves up, like his competitor had Pershing I, Pershing II, Pershing III. Icahn did this too though I forgot the name of his fund. I'm sure there's a good legal/tax reason for this, but they all invest in the same security. What's the reason?
posted by geoff. to Work & Money (3 answers total)

Best answer: They aren’t broken up. They are successive fund offerings over time. When they share the same base name, it signals they are chartered to pursue similar strategies as, and/or or to coinvest with, their predecessors, and usually share the same team of investment professionals. So Alpha 1, 2 and 3 have the same portfolio manager and similar portfolios, with 1 having been opened in 2007, 2 in 2011, and 3 in 2014. Note that funds will often not close for years (particularly for reinvestment by existing investors) so some subscriptions can overlap.
posted by MattD at 9:31 AM on March 25, 2022 [5 favorites]

Best answer: Each vintage of fund will often have two sub funds - a Cayman Island “master” and a US “feeder” - established at the same tile and that is for tax purposes.
posted by MattD at 9:37 AM on March 25, 2022 [1 favorite]

Best answer: Relatedly, there may also be other, smaller side vehicles for, e.g., a specially favored investor class or for employees. They may or may not have similar names.
posted by praemunire at 10:45 AM on March 25, 2022