Edwards S. Lampert is facing an exodus of money from his hedge fund in which clients of Goldman Sachs Group Inc (NYSE:GS) invested through 2007.


Goldman Sachs clients who invested $3.5 billion in Eddie Lampert’s hedge fund back in 2007 have asked to redeem their money.

Redemption pressure

According to Miles Weiss of Bloomberg, the investors who are departing Lampert’s fund originally made their commitment in 2007 and early 2008, when Goldman Sachs Group Inc (NYSE:GS) raised $3.4 billion in new capital for ESL Partners.

Citing known sources, Miles Weiss reports Lampert’s firm began returning the money last year and continued to do so this year, using both cash and securities such as stock in AutoNation, Inc, AutoZone Inc. and Sears Holdings Corp (NASDAQ:SHLD). In its regulatory filing in June, ESL Partners disclosed that it distributed $393 million in AutoNation, Inc. (NYSE:AN) shares to clients who had elected to redeem all or a portion of their investment in the fund.

Investors required to commit for five years

The investors in ESL Partners were required to commit their money for at least five years, Lampert’s standard lockup period. At the beginning of this year, ESL had received notice from these investors seeking redemption of all their money. ESL Partners had the right to meet the redemption over a one-year period rather than pay out at once.

According to a Wall Street Journal report, even without the Goldman-raised funds, over $2.5 billion in outside investor money remains in Mr. Lampert’s hedge fund-firm ESL Investments Inc.

Lampert’s firm has reduced its stake in the company

A few days back, Edward S. Lampert trimmed his stake in Sears Holdings Corp (NASDAQ:SHLD) from 55% to 48%. Lampert disclosed in a statement that his hedge fund had distributed 7.4 million shares in Sears to investors who wanted to withdraw money from his firm. He reiterated that he had not sold any of his personal holdings.

Shares of Sears Holdings Corp (NASDAQ:SHLD) fell 7.7% on Wednesday after it was revealed that Lampert’s firm has reduced its stake in the company.

According to Nathan Vardi of Forbes, the distribution of shares to hedge fund investors suggests Lampert’s investment firm, which manages some $5 billion, has been hit with at least $400 million of end-of-year redemption requests.