Fairholme Fund Manager Steps Down Amid Massive Losses, Sales Declines
The struggling Fairholme hedge fund, which has lost half its value already this year, added another victim this week as Bruce Berkowitz's partner Charlie Fernandez resigned from the fund amid the staggering losses. Fernandez wasa restructuring expert Berkowitz brought in in 2007. They met after Fernandez began dating Berkowitz's cousin, whom he later married. Fernandez and his wife moved into the mansion next door to Berkowitz in a Miami suburb, and the two would often walk the neighborhood streets discussing investment matters.
Over the last year or so, however, the deals in which Fernandez specializes have begun drying up. Fairholme, worth about $18 billion in January, has shriveled in value to $9 billion as investors frantically withdraw money from the fund amid massive losses. Fernandez said that he was leaving for another job, though he declined to offer any details. Berkowitz said he was saddened by the move, though not all that surprised.
The departure of Fernandez is a notable turning point for Fairholme. After hiring Fernandez, Berkowitz expressed ambition to increase Fairholme's value to $25 billion, with the strategy of investing in private companies, such as failed mall operator General Growth Operators. Fairholme began taking in billions of investment dollars, but Berkowitz knew that these investors could pull their money at any time. When shares of the fund's biggest investments like Citigroup, Bank of America and Goldman Sachs began to rapidly lose value earlier this year, a massive withdrawal of funds sure enough began. With Fairhome's recent struggles, Berkowitz has ditched the private firm strategy and is re-focusing the firm's assets on the big financials.
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