Saturday, April 3, 2010

Florian Homm's Biography

I found this on Wikipedia. It seems to go a long way to counteract the terrible press he's gotten. It also makes sense. How could ACMH have functioned as an audited fund and calculated NAV's every month if they didn't know what their holdings were? And anyone can go on Edgar at and look at the filings of these companies and see that Florian and Hunter World Markets are always listed and their relationship is disclosed. It looks like ACMH just pushed Florian way too far through their incompetence and then blamed everything on him. The most amazing thing is that he lost the most money because of ACMH's decisions because he was the biggest ACMH shareholder when he left (not to mention the money that he put directly into the funds in August 2007)!

Florian Wilhelm Juergen Homm

1. Family background and early years

2. Sports career

3. Academic career

4. Civil and charitable activities

5. Professional career

6. Homm’s resignation from ACMH

7. Controversies

8. Misconceptions

8.1 ACMH says that it was completely unaware that Homm had large positions in illiquid US OTC and pink sheet stocks when he resigned.

8.2 ACMH says they were not aware that Homm held a significant equity interest in Hunter World Markets.

8.3 ACMH says that Homm’s U.S. microcap investments generated huge losses for fund holders:

8.4 Why the ACMH share price declined by 88% on the day Homm announced his resignation.

Homm was a prominent and highly successful financier, proprietary trader, investment manager, investment banker, venture capitalist and serial entrepreneur from 1987 until 2007 when he became embroiled in several lawsuits. He is well known for his last second bailout and the successful restructuring of nearly bankrupt German Champions League Winner Borussia Dortmund. He was one of the most outspoken and aggressive European activist investors from the early nineties until 2007. He has been featured in numerous national and international financial and mainstream newspapers, television programs and magazines. He has led a reclusive existence since his resignation from Absolute Capital Management Holdings PLC as Chief Investment Officer in September of 2007. A former professional basketball player, he is suffering from multiple sclerosis.

1. Family background and early years

Florian Wilhelm Juergen Homm was born in Bad Homburg vor der Hoehe near Frankfurt, Germany on October 7th, 1959. He is the son of Joachim Homm, a construction entrepreneur and Maria Barbara Homm, housewife. He has one Brother, Hajo Homm, and a sister, Barbara, who died of pneumonia related to progressive multiple sclerosis. Homm is divorced and has two children. He attended Frankfurt International School where he was an honors student prior to receiving his American High School Diploma as an American Field Service Scholarship student (AFS) from Bentley High School, Livonia Michigan with an A average in 1976. Homm is the great nephew of Josef Neckermann, one of the defining figures in Germany’s post World War II ”Wirtschaftswunder” (economic miracle).

2. Sports Career

In high school, Homm lettered in Varsity Soccer, Basketball, and Track and Field. He competed in league competitions in both tennis and skiing. While a Senior at Livonia Bentley High School, he was elected to the Michigan All State Basketball team (honorable mention) by journalists and started with Magic Jonson on the Michigan Suburban All Star team. He received several scholarship offers in 1976. He played three games for the German Junior National Basketball team against Belgium, Luxemburg and the German Military National Team.[1] Homm qualified for the Harvard University Men’s Varsity Basketball Team as a freshman but soon joined BC Giants Osnabruck, a professional German Basketball Club, thereafter commuting between Boston and Germany during College. He played professional and amateur basketball in France, USA, England and Germany.

3. Academic Career

Prior to attending Harvard College in the fall of 1978, Homm spent one year at the American College in Paris majoring in Political Science. He was also Player and Coach of the ACP basketball team which went undefeated in French University Basketball competition. Homm graduated from Harvard College with a Bachelors degree cum laude in Economics in 1982 and from the Harvard Business School with a Master Degree in Business Administration in 1987. He received an honorary Doctorate (PHD) from Methodist University in Liberia, Monrovia for his life time achievements, and contributions to Liberia in the area of education and culture. While at Harvard Business School, Homm was the President of the Investment Club and the Vice President of the Venture Capital Club. He was the Secretary of the Harvard University International Students Organization (HUISA), the largest international organization at Harvard University at that time. He is fluent or conversant in five languages.

Homm started his first business venture, a Massachusetts Investment Trust, called Intervest, with a fellow student, Michael Kagan, during his freshman year at Harvard. He was also an elected and paid Director of the Harvard Cooperative Society (“HCS”), a regional retailing cooperative with sales of about USD 70 million for two years. Professor Michael Porter and Homm were both Directors of the HCS at the same time. Although Homm never took classes from Dr. Porter, both were also members of the Investment and Committee and met regularly. Homm also visited Dr. Porter at his office at Harvard Business School to present analytical work.

4. Civil and Charitable Activities

Homm was a volunteer in 1978 and 1979 for the Phyllis Brooks House, where he counseled inmates at the Walpole Maximum Security prison in Walpole, Massachusetts. He has contributed to the Catholic Church in Mallorca, Spain and Luxemburg. He solicited over USD 800,000 in donations for the Liberia Renaissance Foundation to further education in Liberia. He is arguably the largest private donor in Liberia since 2002 with personal contributions exceeding USD 1 million.[2] He has been the Cultural Attaché for the Liberian Delegation to UNESCO since 2004[3] and was a Board Member of the Frankfurt International School. Homm was the President of the Spee Club, a Finals Club in Cambridge, Massachusetts. Homm was a founding shareholder and Board member of EASD/EASDAQ in Brussels and served on the Deutsche Börse task force which formulated the establishment of Germany’s Neuer Markt.

5. Professional Career

Upon graduation from Harvard College, Homm joined the Merrill Lynch International Management Training Program. After internships in sales, investment banking, commodities and trading he became an international securities analyst covering South African and Australian companies. He also worked for the Merrill Lynch FO office covering HNW and institutional clients in Latin America. Upon joining FMR in September of 1987, he was assigned sole responsibility for managing the Fidelity Broadcast & Media Fund, which he managed until early 1989. The fund received the award as the top Sector Fund in its category by Lipper in 1988 while outperforming its benchmark and the broad market indices by vast margins during his tenure.

When he left Fidelity, Homm received a recommendation from Peter Lynch. The recommendation was initially formulated by Homm and then edited by Senior Fidelity Portfolio Manager Ernest Wiggins before being given to Lynch for final review. Lynch made several edits and returned the final signed version to Homm. Neither Peter Lynch, nor Fidelity, ever denied the existence or validity of this recommendation, although they did object to its broad use.

After three years with Fidelity, Homm joined Bank Julius Baer (Deutschland) AG as Senior Vice President heading the Institutional Asset Management Division. In 2001 Homm became Managing Partner of Tweedy Browne Europe GmbH. In 1993 he started his own company, Value Management & Research GmbH in 1993, which experienced substantial growth under his leadership and was listed on the Frankfurt Stock Exchange in 1998 reaching a peak market valuation exceeding USD 500 million. As Senior Portfolio Manager and/or Co-Manager of several funds he received several prestigious investment awards during his tenure.

In 1999, Homm was diagnosed and treated for Multiple Sclerosis by Professor Martin, a leading neurologist, from Frankfurt University, Germany. Based on his medical condition, he resigned from VMR AG, sold his equity stake and went into early retirement in Mallorca, Spain at the age of 41. Further MRIs and medical reviews in Florida, Minnesota and the Bay Area confirmed the initial MS diagnosis but, fortunately, his case was less severe than his sister’s. However, blood tests and medical reviews disqualified Homm from obtaining key man insurance while at ACMH. Homm continues to suffer from sporadic incontinence and numbness in his hands, arms and feet.

Being reasonably healthy after a one year hiatus from capital markets, Homm launched the Absolute Europe Fund, a long short Equity Fund, with his own money and those of his Swiss based German partners in 2002. This fund returned 29% in 2002, making it the best or second best performer among all European long and short equity funds according to independent industry performance trackers. Continuing good performance in the following years resulted in the launch of several other funds. Investor appetite for uncorrelated, high return-low volatility funds increased assets under management and ultimately lead to a listing of ACMH on the AIM market of the London Stock Exchange. Add on acquisitions were made in emerging debt and equity markets (Argos) and property investments. The organization initially based in Spain and Switzerland later also had further offices in Asia, the UK, Poland and Latin America. The shares reached a peak market valuation exceeding USD 700 million. In 2006 Absolute Capital Management Holdings received the honor of Europe’s number one Hedge Fund Organization from one of the larger publications covering the sector.

6. Homm’s resignation from ACMH

By mid 2006, Homm’s marriage was in a state of disrepair. Known as a workaholic, Homm had failed to miss all of his children’s birthdays and would frequently spend all nighters analyzing stocks when he was not traveling. Increasingly out of touch with his family, he commented to a friend, “even our neighbors have better and more intimate rapport with my children”. At the time of his resignation, he was separated from his family which had been residing in Florida for over a year.

In November 2006, Homm was shot in the chest in an armed robbery in Caracas, Venezuela.[4] During a six-hour life or death operation he lost part of his lung and his spleen completely. The bullet is still logged in his 12th vertebrae and cannot be removed due to the risk of causing paralysis. This incident left physical and emotional scars. There were several ill fated attempts to get his wife to move back to Europe but she refused. He invested privately in a Palma de Mallorca nightclub and moved in with his girlfriend.

Once the prospect of a family reconciliation became impossible, his wife reopened the divorce case to obtain a fairer settlement. The acrimonious and emotionally charged negotiations involving lawyers, accountants, bankers trustees and relatives resulted in substantial concessions in shares, cash, options, property and other assets for his ex-wife.

Meanwhile at ACMH, substantial internal disagreements and infighting were the order of the day. Homm was hamstrung by the fact that he was not on ACMH’s Board of Directors and was shut out of key decisions. His head trader, Guillermo Hernandez, was fired while Homm was traveling and his personal assistant, Daniela Schaefer, was not allowed to work from ACMH’s premises. Another senior investment professional was harassed and resigned from ACMH. A successful and harmonious marketing partnership was terminated via legal proceedings. A badly needed partnership agreement with experienced Zurich based partners, headed by Clifford zur Nieden, which added much needed turnaround, restructuring and management expertise on US and European activist investments, was also terminated. Investment professionals fired by Homm were rehired by management later. Others, such as Milan Le Hockey and Paul Walton were placed in unsuitable investment management positions. There were massive disagreements over ACMH share sales with Jonathan Treacher, a board memmber. In short, Homm’s position within ACMH was severely undermined and weakened. Constant infighting and family disagreements left Homm with less time and fewer resources to dedicate to the actual management and supervision of ACMH funds.

In the summer of 2007, Homm parted with about 30% of his ACMH share holding which he gifted to three ACMH funds in order to stabilize losses resulting from market disintermediation from small capitalization stocks into larger and more defensive companies. This grant constituted a market value of about Euro 37 million at market prices at the time. His second divorce settlement and related options grants further substantially diminished his ownership position in ACMH below 10%.

No other director or senior management shareholder contributed even one share to this fund stabilization effort. Worse, not one single ACMH insider expressed gratitude for this effort. At the time of the semi-annual bonus reviews in August of 2007, usually conducted by the CEO, CFO and the CIO, management was conspicuously absent. Not known to Homm or the public at the time, ACMH had guaranteed the new ACMH shareholders from the Argos acquisition (Argos, an emerging market debt specialist was purchased by ACMH for shares and cash in 2006) that no more than 20% of performance fee income would be used for the compensation of investment professionals. This figure was ludicrously low as most hedge funds pay between 40% and 50% of their performance fee income to their investment professionals.

ACMH’s own performance attribution records show, that if Homm had been treated like all other ACMH fund managers, his theoretical mid-year bonus payment would have exceeded Euro 8 million in August of 2007. Given his share position, substantial, albeit rapidly dwindling, wealth, and role as founder of ACMH, he settled for a 75% discount and used six million Euros to incentivize and retain investment personnel. He expected to keep the remaining Euro 2 million.

However, by the time bonus discussions were finalized and submitted by Homm, the Board of Directors rejected Homm’s compensation plan. Only then did The Board of Directors inform Homm about the compensation restrictions imposed by the Argos acquisition. Employees could be paid acceptable performance compensation only if Homm rescinded his entire, already deeply discounted Euro 2 million bonus; effectively a Euro 8 million concession to the employees off ACMH that should have been paid by ACMH and not Homm.

The Board’s one sided recommendation brought the situation to the boiling point. Clearly, the well paid management staff could easily have accepted a haircut in their compensation in order to retain the true assets of the firm, namely the key investment professionals. It could have attempted to renegotiate the utterly unrealistic Argos contract clauses. Homm was expected to pay for the errors made by the Board of Directors upon acquiring Argos. Not one single managing shareholder, board member, portfolio manager or senior employee participated or took the slightest haircut in their own compensation to assure personnel continuity. The foundation of the Argos acquisition was based on two extremely shaky assumptions: Homm would need to indefinitely produce massive, outstanding returns thereby generating substantial performance fees while accepting zero incentive compensation or other investment professionals at ACMH would continue to work there at less than half of the industry standard compensation.

The entire burden was carried solely by Homm. At that time many talented professionals had multiple employment offers from competitors. Given the choice to lose key personnel or forego his bonus, Homm agreed to forsake his remaining Euro two million bonus in favor of the investment professionals. After that he simply sat back and awaited responses. There was not one single expression of gratitude from anyone at ACMH. Indeed, there were several calls from disgruntled employees complaining that their compensation was vastly inadequate and unfair.

After serious reflection, Homm made up his mind to resign and contacted his lawyer to prepare a press release citing irreconcilable differences. Given that his personal and business life was in shambles, given that his share position had declined substantially, given 100 hour work weeks with zero incentive compensation, given that critically important staff had either been fired or had left the firm, given that senior management had made fundamental errors when acquiring Argos for which he alone was expected to pay, his decision to resign was not irrational. He stayed in contact with ACMH for several weeks offering a further thirty percent of his remaining holdings to retain key staff as he had promised at one point and to identify buyers for some of the less liquid positions. When both offers were declined he terminated contact with ACMH and became a recluse. ACMH was fully aware of Homm’s reasons for resigning from ACMH.

7. Controversies

Since the late eighties Homm was always known as risk taker and shareholder activist in Europe, the Americas and Asia. These higher risks often meant higher returns. The uncovering of accounting frauds, aggressive short selling practices and equally energetic company promotions naturally resulted in market turbulence. The companies and managers he challenged frequently became agitated and sometimes fought back with full vigor. However, Homm always ended up getting significant returns for his clients.

He was at odds with his senior partners at Tweedy Browne for a lack of coordination when pursuing an asset rich Swiss food manufacturer Galactina AG in a hostile manner. At Merrill Lynch International he performed well as a trainee, yet disappointed the Head of Research with his laissez faire attitude while later ranking among the top young brokers in terms of commissions generated on behalf of the firm.

He was at odds with Fidelity over the continued management of family trusts, yet his fund management record was unquestionably stellar. While CEO of Value Management and Research AG he built a substantial business in only five years, but vetoed a friendly takeover at the last minute while rejecting an agreed merger with a venture capital company the following year. One of his hedge funds experienced substantial losses in 1994 based on overly concentrated portfolio positions, yet within eighteen months the fund exceeded its high water mark and performed well thereafter.

He has paid civil fines to settle both civil and criminal charges levied against him in Germany but has made charitable contributions well in excess of seven figures.

His former employer, ACMH, has portrayed him as the major culprit in a scheme to defraud the funds he managed. MWZ AG was ACMH’s largest single investment in 2007, valued at over eighty million Euros. The position had to be sold due to fraudulent activity by ACMH’s co-investor in this transaction. The buyers refused to honor the severance package of the CEO and the deal almost fell apart. Homm therefore personally funded the CEO’s severance package worth 480,000 Euros to avoid ACMH funds experiencing a full loss on their investment. The stake was sold profitably, yet Homm never asked to be reimbursed for the CEO’s severance payment.

He also never claimed several hundred of thousand of Euros in travel and entertainment expenses during his tenure at ACMH. In order to stabilize three funds, he transferred ACMH shares valued at Euro 37 million free of payment. He also rescinded Euro 8 million in entitled bonus compensation to ACMH employees completely forsaking his own compensation in the process. This is certainly not the behavioral pattern associated with alleged fraudsters.

8. Misconceptions

The following sections address some of the inaccuracies made by ACMH about Homm.

8.1 ACMH says that it was completely unaware that Homm had large positions in illiquid US OTC and pink sheet stocks when he resigned.

Anybody who has ever visited the investment and trading operations of ACMH in Palma de Mallorca knows the office is open plan. It was almost impossible to hold a private conversation without anyone else overhearing it. With over twenty professionals on just 200 square meters of net office space, secrets were hard if not impossible to keep. ACMH employed its own full time risk manager, namely Duncan Greenwood, an experienced risk management expert. Duncan Greenwood’s job was to track and report on portfolio changes, concentration and liquidity risks, geographic and sector overweighting as well as other risk parameters to the CEO (Sean Ewing), CFO (Darren Sisk) and thereby to the Board of Directors and the funds themselves. Indeed Duncan Greenwood reported directly to the CEO and not to Homm, the portfolio managers or the trading desk. The purpose of this reporting structure was to assure continuous and objective oversight of the investment professionals and their portfolios by the management team and the Board of Directors.

Therefore every ACMH fund’s portfolio holdings, geographic and industry structure was available to senior management and the Board of Directors all of the time. The funds’ auditors produced fully audited annual reports which often listed U.S. microcap holdings by name. Indeed the auditors would verify the validity of the valuation assumptions of each fund on a regular basis. Likewise the funds’ administrators, BNY and Fortis, would verify whether the investments were in accordance with the fund prospectuses on a regular basis as well. All these reports were reviewed by the Directors of ACMH. Moreover, neither the trading desk nor individual portfolio managers could directly authorize wire transfers outside of the funds without management review, approval and final authorization. This fact is especially relevant regarding Hunter World Market (“HMW”) Initial Public Offerings in U.S. microcaps. Wire transfers instructions included names of the companies, the brokers and other intermediaries involved. Sean Ewing and Darren Sisk authorized several of these subscriptions. Homm was simply not able instruct the wiring of funds.

In addition many of these U.S. holdings involved regular regulatory filings. Glenn Kennedy, ACMH’s General Counsel had responsibility for making these filings. Dozens of filings show the full extent of the fund’s investment in all sorts of securities, especially the concentrated holdings in U.S. microcap companies where equity positions frequently exceeded five percent and therefore required 13D filings. These filings were also fully available for public scrutiny. Ewing and Sisk signed off on these transactions and received regular risk management reports. They also received copies of the funds’ annual reports, or were in regular contact with ACMH’s trading and investment professionals.

Moreover, ACMH’s internal risk reports showed concentration by geography, industry and market capitalization clearly evidencing the large positions in U.S. listed securities. Indeed Homm’s bias to American and European smaller, higher return but also higher risk companies was well known throughout his career and a matter of public record. His flops were also well known. Many investors would shy away from ACMH funds because the underlying positions did not have sufficient liquidity from their perspective and were simply not European enough based on publically available material. This frequently cited reason by potential investors for not investing in ACMH funds was the principal reason for launching the Absolute Capital European Large Cap Fund. Because some investors did not wish to invest in funds with significant microcap and small cap exposure, ACMH decided to create a product which invests only into large, very liquid European companies. ACMH Directors always had full access to all fund holdings and information all of the time. Moreover fund co-managers professionals were placed on the Boards of at least two larger U.S. microcap company holdings. ACMH knew that significant assets were invested in U.S. microcaps.

8.2 ACMH says they were not aware that Homm held a significant equity interest in Hunter World Markets.

Homm’s equity position in Hunter World Markets was a matter of public record in NASD/FINRA filings as early as 2005. From 2005 to 2008, Homm was listed personally as the owner of 50% of HWM in easily accesible NASD/FINRA records. Public SEC filings relating to HWM IPOs also show Homm as beneficial owner of Hunter World Markets. Todd Ficeto, the CEO of Hunter World Markets, made frequent visits to ACMH offices in Spain and London and met with Board members, portfolio managers and traders. He even brought management teams from companies HWM was clients to ACMH offices. He also encouraged ACMH subsidiaries such as Argos and Andreas Rialas to do business with him based on Homm’s ownership position in HWM. Indeed, all Hunter World Markets corporate clients were informed about the relationship between the firm’s shareholders and the latter’s role as significant shareholder and CIO of ACMH.

Because of the NASD/FINRA regulations, there was never any possibility that Homm could conceal his stake in HWM. Furthermore, during his entire seven years at ACMH, Homm never even owned or used a personal and private computer. ACMH had 100% access Homm’s private and company emails and communications. Without a doubt, the Board of Directors and most of the senior ACMH investment and trading professionals were aware of Homm’s ownership position and trading relationship with HWM. In fact, one prominent investor sold their position in ACMH funds in 2006 because of this relationship. Many of these U.S. microcap holdings were discussed by Homm and Andreas Rialas, also a Board Member in telephone conferences. ACMH knew that Homm held a significant equity interest in Hunter World Markets. ACMH knew about and agreed to the compensation he received from HWM.

8.3 ACMH says that Homm’s U.S. microcap investments generated huge losses for fund holders:

Homm’s most successful investment with HWM was ID Biomedical, a Canadian biotechnology company. HMW’s investment banking sponsorship, not only saved the company, but the company’s market value ultimately increased from about USD 15 million to USD 2 billion when the company was sold to Baxter. Pro Elite was initially funded by the American TV network CBS and ACMH as an alternative to the highly profitable United Fight Club. The venture appeared promising and the market cap rose to USD 1.3 billion. ACMH sold its shares into the market move, rather than prop up shares as alleged. Pro Elite Fight Night was the first ever mixed martial arts event ever hosted by a national TV broadcaster (CBS) during prime time. Pro Elite Fight Night scored an astonishing 25% national market share in its key demographic segment. Homm’s departure from ACMH, however, effectively removed Pro Elite’s principal financial funding source for further events, broadcasts and corporate development.

Some investments had long term potential, but suffered because of ACMH’s public announcements after Homm’s resignation, such as Java Detour. In some cases reasonable positions were sold poorly (LGSL) or to former insiders (ID Biomedical) at unsatisfactory prices. Certain companies could not develop a sustainable business model (Berman) or failed to reach relevant milestones to justify further investments (Duravest) and declined well before Homm left the company. However, no investment was made without a detailed rationale. After Homm resigned, an entire portfolio of ACMH assets was sold, in one lot, to Rene Müller, a Swiss financier. He financed the purchase exclusively with bank debt (which would not have been possible if they were worthless) and then sold only one portfolio holding immediately to a trade buyer (Hiller Schwab). Proceeds from this sale alone were sufficient to repay the bank loan in full. Thereafter, he retained all other assets free and clear.

Perhaps most tellingly, Kevin Bone, ACMH’s CIO after Homm, considered taking the U.S. microcap investments and forming a new “Phoenix Fund” around them. In any event, ACMH invested $2 million into Penthouse, one of the illiquid microcaps, after Homm left.

It is worth noting that other ACMH funds, where Homm had almost no involvement, also invested in illiquid microcaps. The manager of the East-West fund lost approximately USD 40 million in Columbia Gold Fields, a microcap.

An overlooked point is that ACMH was able to meet redemptions much faster than many hedge funds in a similar situation. Homm can neither be blamed for the market’s collapse, nor the poor results in managing the ACMH portfolios after his departure. The market itself was entering its most profound crisis since the Great Depression eighty years ago. With GM, Bear Stearns, Lehman and AIG collapsing and Citigroup declining more than 95%, it is natural that the same, or worse, would happen to small growth companies without financial or governmental backing.

Stripping out all illiquid U.S. microcap investments held by funds managed by Homm and valuing them at zero would have resulted in less than a twenty percent decline in ACMH group equity assets in September 2007. According to performance trackers, European long/short equity hedge funds declined on average more than thirty percent from peak to trough during the recent financial crisis and European equity indices lost approximately sixty percent overall during the same period. Virtually all ACMH equity fund losses are now attributed to Homm, when the simple truth is that fund performance really declined after his departure and many losses had absolutely nothing to do with investment decisions taken during his tenure.

8.4 Why the ACMH share price declined by 88% on the day Homm announced his resignation.

There were approximately seventy other professionals at ACMH when Homm resigned, several with outstanding management and investment credentials. Surely, others would be able to pick up the slack in such a widely spread organization. Moreover, even the funds managed directly by Homm had co-managers assigned to them. The company had no debt and was generating massive cash flows, was paying a high dividend, over a dozen accomplished portfolio managers who could pick up the slack, and a substantial amount of unencumbered cash to fund operations for years even without any performance fee income.

The market and fund investors were largely aware of the risks involving ACMH, its positions and involvements in less liquid securities. Independent hedge fund analysts even alluded to these risk factors in their reports. A former disgruntled employee had mailed out over twenty notifications to clients, the media and regulators alluding to the HMW ownership by Homm, self dealing and share price propping at ACMH in March 2006. Glenn Kennedy and Sean Ewing were fully aware of this letter and its contents. Both devised strategies on how to deal with this hostile effort. Several clients were also aware of this letter. One made a major redemption as noted above. Very critical analyst reports relating to legal and other ACMH risks were also available and on the internet at that time.

Many investors shied away due to these obvious and well documented risks. Some investors may have been unaware of the potential risks, but largely for a lack of professional due diligence. The broad market knew full well that Homm’s investment style was riskier than most; that while obviously successful, he also had a colorful history in U.S. microcaps. Even the most junior investment analyst could determine that leveraged small cap investments would suffer in a market favoring larger more defensive companies. As long as Homm oversaw the investment process and held his team together, these risks appeared manageable assuming a friendly market. While Homm managed or co-managed less than 20% of group assets at the time of his departure, he actually generated half of all attributable performance profits during the first half of 2007. He made substantial personal sacrifices to keep the investment team together and the funds in neutral or positive territory. Once he departed the company it was certainly possible that many of its funds would be negatively affected, the organization would become unglued and the key employees would leave, unless ACMH’s directors and executives properly managed his departure. Instead, they panicked, made allegations which defy rational analysis, and generally applied the same principles of mismanagement that caused Homm to resign in the first place. The market, at least, sometimes reads between the lines.

[1] Martin Schimke, former teammate now a prominent lawyer in Dusseldorf, Germany. Mr. Schimke obtained statistical records from the German Basketball Federation



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