Recent failures slow growth of Icahn's funds
NEW YORK - Carl Icahn has hit the roughest patch of his hedge fund career.
His $7.9 billion in hedge funds fell 7 percent between October and April, the biggest peak-to-trough loss since the funds opened in November 2004, according to investors. That compares with an average annual return on his investments of 53 percent from 1996 to mid-2004.
Icahn has lost money on cellular-phone maker Motorola Inc., his biggest investment. The 72-year-old billionaire also failed to persuade executives at Yahoo Inc. and Biogen Idec Inc. to take his advice for boosting their stock.
While falling equity markets and the slowing economy are beyond Icahn's command, the setbacks at Yahoo and Biogen Idec don't bode well for his future as an activist shareholder, said Brett Barth, a partner at New York-based BBR Partners, which has invested $1 billion in hedge funds.
Icahn has so far come up short in his efforts to force Sunnyvale, Calif.-based Yahoo to sell itself to Microsoft Corp. He also lost a recent proxy battle to elect his candidates to the board of Cambridge-based Biogen Idec, making a sale of the world's biggest maker of multiple sclerosis drugs less likely.
Icahn declined to comment on his investments and performance. The funds rose 6.3 percent during the past 17 months, compared with a 1.5 percent increase in the Standard & Poor's 500 Index.
His funds trail activist investor Daniel Loeb's New York-based Third Point Offshore Fund, which gained 17.4 percent during the same period. Chris Hohn's TCI Fund Management LLP returned 37 percent in the same period.
The mediocre returns are a comedown for Icahn, who has earned billions as a corporate raider, including the 1985 takeover of Trans World Airlines Inc. He made $893 million trying to break up RJR Nabisco Holdings Corp. in the 1990s.
Icahn generated a 53 percent annual return on invested capital from January 1996 to May 2004, according to documents used in 2004 to market his New York-based hedge funds. In 2006, the Icahn Fund rose about 29 percent, while the Standard & Poor's 500 Index advanced 13.6 percent.
Since then, Icahn has struggled. He paid about $2.3 billion, or roughly $13 a share, for his 7.6 percent stake in Motorola, according to a filing with the Securities and Exchange Commission.
Icahn made an unsuccessful bid for a board seat last year.
His biggest success was BEA Systems Inc. this year. Icahn bought shares of the San Jose, Calif.-based software company for $12.81 a share, on average, and then pressed BEA and bigger rival Oracle Corp. to merge. Oracle bought BEA in April.
"All these activists are going to have lumpy returns," said Brad Alford, head of Alpha Capital Management LLC in Atlanta. He considers Icahn "one of the best activists out there."
