(Corrects year in second to last paragraph to 2007)
* At least four investment professionals have left fund
* Harbinger trying to streamline and cut fund staff
* Fund's assets are down to about $7 bln from $26 bln peak
By Emily Chasan and Matthew Goldstein
NEW YORK, Jan 12 Prominent hedge fund manager
Phil Falcone's $7 billion Harbinger Capital Management has been
hit by a series of high profile departures in the past few
weeks, according to people familiar with the fund.
While some departures were voluntary, others were part of
an effort to cut the fund's staff, as the firm's assets have
shrunk from a peak of $26.5 billion in 2008, the sources said.
Earlier this week, Falcone wrote to his investors saying
Lawrence Clark, 39, a senior analyst on the firm's investment
team since 2007, would be leaving to start his own fund. But
Falcone's letter did not mention the recent departure of three
other Harbinger employees.
Kenneth Turano, a 29-year-old trader who was described as
close to Clark, also left in the past few days and is expected
to join a fund Clark is launching, one of the sources said.
While Clark and Turano left voluntarily, some other
Harbinger employees have been pushed out the door, the sources
said. Clark Baker, 49, and Eli Benson, 36, both investment
analysts at Harbinger, were let go in the past few weeks,
according to the sources, who asked not to be named because
they were not authorized to speak to the media. Benson and
Baker could not be reached for comment.
One person familiar with Harbinger suggested that some of
the departures reflected a "rightsizing" of the fund and an
attempt to streamline its operations.
Others, including several investors, suggested it may
reflect the limited ability Falcone's fund has to make big
investment bets with so much capital tied up in a big telecom
Falcone's fund is the primary investor and owner of a
startup wireless telecom called LightSquared, which has an
ambitious plan to bring high-speed mobile Internet access to
all corners of the United States.
The investment, which represents nearly 40 percent of
Harbinger's total assets, has unnerved some investors because
of the speculative nature of the bet.
Over the past few months, the New York-based hedge fund has
been liquidating several of its other positions amid redemption
requests from some of its big investors, according to other
sources familiar with the fund's performance.
While Harbinger has not released its full-year numbers yet,
Falcone's flagship fund was down about 12 percent for the year
as of mid-December, according to an investor. The firm's
Special Situations Fund, which Falcone has limited withdrawals
from for roughly two years, ended the year down about 12.3
percent as well, according to the investor.
The investor, who did not want to be identified, said
Falcone was losing a lot of research firepower with the
departures of Clark, Baker and Benson.
In the letter, Falcone said he was "very supportive" of
Clark's decision to launch his own fund. Benson, a distressed
debt expert, had been with Harbinger since 2005.
Baker, meanwhile, had a role in helping to manage Falcone's
profitable bet on the collapse of the subprime housing market.
It was the subprime bet that made Falcone the toast of the
hedge fund world and turned him into an overnight billionaire
with a 116 percent return in 2007.
Turano, who joined Harbinger in 2005 and reported to top
trader Robert Lambert, had a natural kinship with Falcone.
Turano played on Harvard University's hockey team, where
Falcone, who was born in Chisholm, Minnesota, was a star player
some 20 years before.
(Reporting by Emily Chasan and Matthew Goldstein; Editing by
Gary Hill and Steve Orlofsky)