The resignation of Yaakov Weinstein from Migdal Capital Markets has led to the closing of the Dragon Ventures hedge fund, which he headed, with Migdal Capital Markets writing off a NIS 7.5 million investment.
As a result of the loss of accounting goodwill caused by the closing of Dragon, Migdal Capital Markets made a loss in the second quarter of the year. The CEO of Migdal Capital Markets is Yossi Ben Baruch, and its chairman is Israel Eliahu, son of the Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) group controlling shareholder.
Weinstein began working at Migdal Capital Markets in 2006, following the acquisition of the Afikim investment house, which he owned and managed, for NIS 140 million. He was chief investment officer at Migdal Capital Markets and the investment manager for specific mutual funds belonging to Migdal Mutual Funds, and managed a number of portfolios. Starting in early 2013, he also served as investment manager for Dragon (formerly Tau Hedge Funds). Migdal owns 71% of Dragon's shares. The fund was a marketing initiative designed as an attractive investment product for private clients in a low-interest environment, but was unsuccessful.
When the fund was closed, it had NIS 7.5 million in managed assets. Its investments did not lose money for its investors, whose money was returned, as far as is known, without any significant profit. An informed source said today, "It was known in the industry that Dragon had outlived its usefulness, and was living on borrowed time. Over the years, mainly at the end of the preceding decade, Migdal enjoyed good returns from this fund.
"Since Migdal was both a partner in the management company and owned equity in the fund, Dragon benefited from substantial goodwill in Migdal's books. The write-off is therefore probably a combination of writing off future profits for the management company and sale of the assets at a low price, which is common in cases in which an investment fund goes out of business."
NIS 40 million in eight years
Weinstein's employment agreement was in effect until May 15, 2014, and came to an end on that date, without being extended, at which point Weinstein officially left the investment house. He was one of the highest paid executives in the financial sector, receiving more than NIS 40 million in 2008-2013, an annual average of over NIS 6.7 million.
Migdal Capital Markets is not completely halting it hedge fund business. About four months ago, it was reported that Migdal chairman and controlling shareholder Shlomo Eliahu was investing NIS 35 million in the MGT hedge fund, founded and managed by Migdal Capital Markets. It was also reported then that in addition to Eliahu's investment, Migdal Capital Markets was also investing a similar amount. The MGT fund, set up at the beginning of the year, specializes in investments in "a number of instruments and strategies" in overseas markets.
Published by Globes [online], Israel business news - www.globes-online.com - on September 4, 2014
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