Eddie Lampert, the billionaire hedge fund manger and controlling shareholder of Sears Holdings, is embarking on an effort to raise billions in new money for his widely successful hedge fund, ESL, according to people familiar with the situation.
ESL is already a giant, with assets in excess of $18 billion. But Lampert has rarely raised new money. Almost all the assets in the fund are the result of compounding, given his 19 year old fund has delivered annual returns, net of fees, that approach 30%. And the fund's largest position, a 40% stake in Sears Holding, is not exactly liquid.
Rather than raise money by pursuing his own marketing strategy, Lampert has enlisted Goldman Sachs to raise him what is expected to be between $3 and $5 billion. Goldman will essentially be doing a private placement of limited partnership units in ESL. The minimum investment is $25 million.
And the money will carry a five year lock up with six months notice due to withdraw or else you're in for another five years. Lampert has traditionally had long lock-ups given his style of investing is to take large positions and hold them for many years.
Goldman is expected to have some sort of modified road show for the capital raising. While $3 to $5 billion in new funds may be the target, given the unprecedented liquidity in the market and the track record of ESL, it's possible the offering could attract more than $5 billion.
Why is Lampert raising money now? A spokesman for ESL declined comment, but the obvious answer would be because he can. Of course, raising so much new money will allow Lampert to either increase the size of some his current positions, including a stake in Citigroup, or begin to take some new large stakes.