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Davidson Kempner Capital Management Review

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Davidson Kempner Capital Management

Davidson Kempner Capital Management, LP is an investment management firm with more than $35 billion in assets under management (AUM). It manages a total of 45 funds, or pooled investment vehicles, 33 of which are hedge funds. The firm currently employs 119 advisors.

It's important to understand that hedge funds are often complex, loosely regulated investments and therefore only accessible to accredited investors. If you're looking for trusted and comprehensive support in managing your own finances, consider speaking to a professional financial advisor.

Davidson Kempner Capital Management Background

Davidson Kempner Capital Management and its affiliates began managing capital for unaffiliated investors in 1987. The firm has affiliates in London, Hong Kong and Dublin. All three of these entities are under the same control as the firm.

With regards to providing investment management services to its funds, the firm and affiliates retain full discretionary authority about investment decisions. The investors make these decisions according to investment objectives and guidelines detailed in the government governing documents of each fund. The firm's funds are categorized as follows: Multi-Strategy Funds, Distressed Funds, Long-Term Funds and Special Opportunities Funds. The firm and its affiliates do not manage any wrap fee programs.

The firm's clients are private funds, which are pooled investment vehicles that are organized as domestic limited partnerships or offshore corporations (including hedge funds). Investors in what are called the Proprietary Funds consist solely of the firm's managing members and specific former managing members; members of the immediate families of those people; trusts or other entities and certain eligible employees. Investors in the other four funds named above may include individuals; banks or thrift institutions; investment companies; pension and profit-sharing plans; trusts, estates or charitable organizations; corporations or other business entities; certain eligible employees and affiliates of the firm. Minimum investment amounts vary by fund, but can range from $2 million to $5 million. Investors in these funds must additionally be accredited investors.

Davidson Kempner Capital Management Investment Philosophy

Davidson Kempner Capital Management uses a variety of investment strategies, including arbitrage (buying and selling the same asset in different markets simultaneously in order to profit from small differences in the asset's listed price) and other event-driven strategies, including investments in financially distressed companies. Investment decisions and advice are offered and executed according to investment objectives and guidelines in each fund's governing documents and memos. The firm may also regularly obtain advice from attorneys, accountants and other experts to assist in analyzing certain investment situations. Primary investment strategies include: distress investing, mergers and acquisitions arbitrage, long/short equities and more.

The distressed investment strategy involves investing in securities of distressed companies undergoing liquidation, restructuring, refinancing pressures or substantial litigation. These opportunities undergo a rigorous fundamental, bottom-up analysis by the firm.

The firm's merger arbitrage strategy involves investing in securities with an announced or anticipated catalyst or event, like a merger or takeover offer, auction or exchange offer. In response to or in anticipation of such events, the firm conducts an analysis of the business and financial conditions and uses this analysis to purchase securities.

The firm's long/short equity strategy involves investing in long positions that it feels are undervalued by the market as well as short positions that it feels are overvalued by the market.

Of course, it is important for clients to remember that no investing strategy guarantees against risk of loss.

Largest Hedge Funds Managed by Davidson Kempner Capital Management

Davidson Kempner International, Ltd.

  • AUM: $10,040,741,242
  • Minimum: $3 million
  • Beneficial Owners: 515

Davidson Kempner Institutional Partners, LP

  • AUM: $9,760,276,773
  • Minimum: $5 million
  • Beneficial Owners: 531

Davidson Kempner Partners

  • AUM: $4,326,226,243
  • Minimum: $5 million
  • Beneficial Owners: 482

Davidson Kempner Distressed Opportunities International Ltd.

  • AUM: $2,088,802,612
  • Minimum: $2 million
  • Beneficial Owners: 193

M.H. Davidson & Co. 520 LP

  • AUM: $1,819,806,746
  • Minimum: 0
  • Beneficial Owners: 75

Fees at Davidson Kempner Capital Management

Fees received by the advisor from the private funds are comprised of fees based on a percentage of AUM as well as annual performance-based fees.

Management fees at Davidson Kempner are charged at annual rates of 1%-1.75% of net assets for the Multi-Strategy Fund or the Distressed Fund. For the Long-Term Fund, management fees are charged and annual rates of 1.5% of committed capital and 0.50% to 0.75% of net assets of the Special Opportunities Fund. Generally, fees are non-negotiable, but the advisor has discretion in setting management fees and adjusting them depending on the status of particular investors.

With regards to performance-based fees, for the Multi-Strategy Funds and Distressed Funds, this is equal to 20% of net capital appreciation, or net increase in value of assets, for the year. For the Long-Term Funds, performance compensation is in the form of carried interest, generally equal to 20% of net capital appreciation. For the Special Opportunities Funds it is also in the form of carried interest, up to 15% of net capital appreciation. Again, advisors have discretion regarding setting the amount of this compensation and determining whether to adjust.

Additional fees and expenses may apply - including but not limited to registration fees, maintenance fees, certain taxes and regulatory expenses - so it is imperative that potential clients read their documents carefully and reach out about specific fees charged to their fund.

What to Watch Out For

Again, it's important to understand that hedge funds are often complex, loosely regulated investments and therefore accessible only to accredited investors. Such investors differ from retail investors or individual investors, who might be taking a more DIY approach or enlisting the services of a financial advisor.

Davidson Kempner Capital Management LP has one disclosure from within the last 10 years listed on its latest SEC-filed Form ADV, with regards to Davidson Kempner European Partners, LLP. It was initiated in 2015 by the Swedish Financial Supervisory Advisory Authority, which instituted a civil and administrative penalty based on what was later described in the SEC filing to be an administrative error. The matter was eventually settled by Davidson Kempner European Partners, LLP by paying an administrative penalty of $11,450.

As an SEC-registered investment manager, the firm is legally obligated to uphold its fiduciary duty and work in clients’ best interests at all times. You can view its latest Form ADV on the official website of the Securities & Exchange Commission (SEC).

Becoming a Client of Davidson Kempner Capital Management

If you are an accredited investor and wish to invest in Davidson Kempner's funds, you can visit its website or call (212) 446-4000.

All information is accurate as of the writing of this article.

Investing Tips

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How Long $1mm Lasts in Retirement

SmartAsset's interactive map highlights places where $1 million will last the longest in retirement. Zoom between states and the national map to see the top spots in each region. Also, scroll over any city to learn about the cost of living in retirement for that location.

Least
Most
Rank City Housing Expenses Food Expenses Healthcare Expenses Utilities Expenses Transportation Expenses

Methodology We analyzed data on average expenditures for seniors, cost of living and investment returns to determine how many years of retirement a $1 million nest egg would cover in cities across America.

First, we looked at data from the Bureau of Labor Statistics (BLS) on the average annual expenditures of seniors. We then applied cost of living data from the Council for Community and Economic Research to adjust those national average spending levels based on the costs of each expense category (housing, food, healthcare, utilities, transportation and other) in each city. Using this data, SmartAsset calculated the average cost of living for retirees in the largest U.S. cities.

We assumed the $1 million would grow at a real return (interest minus inflation) of 2%. Then, we divided $1 million by the sum of each of those annual numbers to determine how long $1 million would cover retirement expenses in each of the cities in our study. Cities where $1 million lasted the longest ranked the highest in the study.

Sources: Bureau of Labor Statistics (BLS), Council for Community and Economic Research