Billionaire Carl Icahn Returning $1.76 Billion to Investors

Carl IcahnOn the eve of the bull market's second anniversary, billionaire investor Carl Icahn had an unsettling message for his investors: Take your money back. Icahn told investors in his hedge funds that he didn't want to be responsible to them for "another possible market crisis," especially given the rapid increases over the past two years. Stocks have nearly doubled since hitting 12-year lows on March 9, 2009.

Icahn, who has built a fortune from taking stakes in well-known companies and then pressing for changes, also said he was also concerned about the economic outlook and political tensions in the Middle East. Icahn's targets over the years have included Yahoo Inc., RJR Nabisco and Revlon.

"While we are not forecasting renewed market dislocation, this possibility cannot be dismissed," Icahn said in a letter to his limited partners. The letter was dated Monday and disclosed in a regulatory filing Tuesday.

Outside investors make up just 25 percent, or $1.76 billion, of the $7 billion in assets Icahn oversees. Despite losses in 2008, the funds have had returns of 106.9 percent since their inception in 2004. In the first two months of the year the funds have returned 8.7 percent.

Not everyone believes Icahn is returning his investors' money because he's bearish about the markets.

Jack Ablin, chief investment officer at Harris Private Bank, said Icahn is likely trying to avoid regulatory scrutiny. Under new laws, hedge funds have to register with the Securities and Exchange Commission and allow the agency to inspect them.

"Why submit yourself to regulatory scrutiny when you don't have to?" asked Ablin. "But I think if he had spelled it out that way, it wouldn't have gone over too well."

Icahn is known as a corporate raider with a personal fortune estimated by Forbes to be worth $11 billion, mostly from forcing changes at companies in which he invests.

"When you have that kind of money, why bother with limited partners? Most hedge fund managers dream of managing just their own money," said Michael R. Levin, who writes the blog The Activist Investor.

In his letter, Icahn said he was bothered by the losses that the funds incurred in 2008 and the fact that many of the investors withdrew large amounts of cash at the time.

For the kind of activism that Icahn is involved in, it didn't help that investors were pulling their money out. Activist investors operate in some ways like private-equity funds, said Damien Park, managing partner at Hedge Fund Solutions, which advises investors and companies on shareholder activism. Park said that such flight of capital hurts their longer term strategies since they need to have ample capital on hand to manage an activist campaign, which can run as long as two or three years.

By allowing his investors to cash out, Icahn is back to relying on his own funds.

"At the end of this, he will still manage a sizable fund and he is still Carl Icahn," says Park.

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May 29 2011 at 12:39 AM Report abuse rate up rate down Reply

Typical of the hateful media. This guy may be doing nothing more than trying to do his investors a solid, and the media has to say he's trying to hide something. They don't need any proof or evidence, all they need to do is hint at an impropriety and BOOM! The man is destroyed or forever stigmatized.

March 10 2011 at 10:48 AM Report abuse rate up rate down Reply

I do believe this billionaire invester was being quite frank and honest in his dealings and he makes much sense in more ways than one. If your ever to succeed in anything even stocks ect you have to take some inititive and fortitude and change what is broken and fix the system so it runs smoothly with no problems. He offered to let investors take back their monies if they so desired. What a pal, now that is what i call a honest person. He may be super wise but he is someone i'd surely trust handling my money...... think about it who else out there is doing what he is doing? Something to ponder about im sure.... ;)

March 10 2011 at 4:18 AM Report abuse +1 rate up rate down Reply

I am very sickly an need help. I am alupus, fibromyalgia, hypertension. diebetic,and also copd.I had a very small company. and was not able to keep it. due to medical.I need surgery on my back and also need two knee replacements.
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it's gotten so bad I may have to stop because I can't pay my tuition. Should you find it in your heart to help me I would be forever grateful.
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March 09 2011 at 9:55 PM Report abuse rate up rate down Reply

I think he's sincere. He isn't saying they must receive it back, only on advise. He's still subject to SEC rules and regulations.

March 09 2011 at 8:00 PM Report abuse +1 rate up rate down Reply

Nothing new in Wall Street. Corporate greed will crash it down again and not until then will the people realize that we need to round them all up and put the them in jail for this. This is no different from a home invader stealing from your house. We have been part of the biggest bank heist in the history of the world of 700 billion $ and no one went to jail for it. The guy that steal a candy bar gets 5 years in jail plus another 3 years probation. This countries legal system is a joke. I guarentee if the legal system was executed like it is suppose to be, we would not have any of these a$$wholes doing what they do. They would not be stealing public workers pension funds and the private sector workers 401Ks. Speculation is the mother of all evils!

March 09 2011 at 7:12 PM Report abuse +1 rate up rate down Reply

I sure wish he would send me some money. I sure could use it.

March 09 2011 at 5:45 PM Report abuse +2 rate up rate down Reply

All you apologists:
he could use it as toilet paper for the remainder of his LIFE
and never miss a meal.
How magnanimous of him.
Now show us all something--and PAY SOME TAXES.
And encourage your buddies to do the same:
soaking the poor any further is just mean-spirited
and evil.

March 09 2011 at 11:42 AM Report abuse +5 rate up rate down Reply

I dont understand why Carl Icahn didnt get into General Motors before it went under. He could have prevented it.. General Motors was really cheap back then. Easy for him to control half ..

March 09 2011 at 10:39 AM Report abuse rate up rate down Reply
1 reply to Gumby's comment

One word: VOLT

March 09 2011 at 6:48 PM Report abuse rate up rate down Reply

I believe he is telling it like it is............we all know what is coming.....

March 09 2011 at 9:55 AM Report abuse +6 rate up rate down Reply