Bleichroeder L.P. – A “new” hedge fund with old roots, has $2.8B in AUM, and already has some big winners.

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Gerson von Bleichröder (22 December 1822 – 18 February 1893) Source: Wikipedia

Otto von Bismarck, the “Iron Chancellor,” engineered the unification of Germany in the 1870s. Bismark’s close adviser and confident was a German-Jewish banker, Gerson von Bleichroeder. Bleichroeder’s bank played a key role in Bismarck’s ascension to power, helping to bankroll the German Empire. Now, a century-and-a-half later, a “new” hedge fund, Bleichroeder L.P., with roots dating back to Gerson von Bleichroeder, has re-emerged. With $2.8B in AUM, the fund, managed by Andrew Gundlach and Michael Kellen, already has some big winners.

While S. Bleichroeder bank suffered through the depression of the 1920s and 1930s, it was Hitler’s Aryanization process that brought an end to the bank — at least in Germany. In 1931, Hans Arnhold combined his firm with S. Bleichroeder to form Arnhold and S. Bleichroeder. In 1937, Arnhold and his son-in-law, Stephen Kellen, restarted the firm’s activities in New York City.

In 1967, Arnhold and S. Bleichroeder launched its first offshore fund, using the First Eagle name. That firm eventually became First Eagle Investment Management (FEIM), an investment company that today manages $101 billion. Bleichroeder L.P. is a spin-off from FEIM. And based on early returns, the hedge fund bears watching.

George Soros and Jim Rogers started their hedge fund careers with Bleichroder LP’s predecessor First Eagle Funds.

Also in 1967, George Soros got his start in the hedge fund business working as a manager for First Eagle. Another storied money manager, Jim Rogers, joined the firm in 1970 and left in 1973 to form the Quantum Fund with Soros.

In 1987 First Eagle launched its first U.S. registered mutual fund, the First Eagle Fund of America, with Michael Kellen as the portfolio manager, who subsequently became Vice Chairman and Co-CEO of Arnhold and S. Bleichroeder Holdings. Kellen has been a Vice Chairman & Director at FEIM since 2003. Andrew Gundlach, a member of Arnhold and S. Bleichroeder’s founding family, joined First Eagle in 2003.

In December 2015, Blackstone and Corsair Capital bought majority control of First Eagle Holdings, a transaction initiated by Gundlach.

Gundlach and Kellen are the principal owners of Bleichroeder LP. They remain shareholders and directors of First Eagle Holdings, Inc., parent company of FEIM.

From a recent regulatory filing:

On September 1, 2019, the family office personnel of FEIM, including Messrs. Michael M. Kellen and Andrew Gundlach, separated their investment management business from that of FEIM, transferring their family’s advisory client accounts, including the securities of the Company which were formerly controlled by FEIM, to the newly formed U.S. registered advisory firm named Bleichroeder LP. 

 
Because Bleichroeder L.P. now controls the former FEIS family office portfolio, a number of 13Gs and 13Ds were filed by the new firm in early Sept.– predominately small and micro-cap medical and tech stocks. The performance of these stocks since Sept. 1 is shown below.

Bleichroeder L.P. 13D & 13G filings since the hedge fund’s registration become effective on Sept.1, 2019.

Filing DateFormSymbol9-1-19 Price2-7-20 Price% Chg% ownership
1/9/20SC 13G/AARQL2.28%
9/27/19SC 13G/ADUOT17.75%
9/13/19SC 13GSAVA1.228.16569%13.59%
9/6/19SC 13G/AARQL13.25%
9/6/19SC 13GDRRX1.781.59-11%13.79%
9/6/19SC 13GIVAC21.64%
9/6/19SC 13GDUOT5.67.515.73%
9/6/19SC 13GCUI0.671.164%12.90%
9/5/19SC 13GARQL9.1120120%13.25%
9/5/19SC 13GIDN4.78.9190%17.24%
9/5/19SC 13GIVAC4.866.636%21.64%
9/5/19SC 13GINVE4.985.041%11.24%
9/5/19SC 13GARCW0.160.19321%9.23%
9/5/19SC 13DARDMQ0.1550.1499-3%26.54%

It’s apparent by the holdings disclosed above, that Bleichroeder L.P. will have a small-cap focus. Indeed, in the firm’s ADV part II filed with the SEC, the firm makes the following disclosure.

Small Capitalization Stocks


At any given time, Bleichroeder may make significant investments in smaller-sized companies of a less seasoned nature whose securities may be traded in the over-the-counter market. These “secondary” securities often involve significantly greater risks than the securities of larger, better known companies. In addition to being subject to the general market risk that common stock prices may decline over short or even extended periods, Bleichroeder may invest in securities of companies that are not well known to the investing public, may not have significant institutional ownership and may have cyclical, static or only moderate growth prospects. The stocks of such companies may be more volatile in price and have lower trading volumes than the larger capitalization stocks.

The focus on small caps has paid off so far. Bleichroeder L.P showed a 13.59% stake in Cassava Sciences Inc (SAVA) on Sept 13. From Dec.19 through Jan. 3, the stock skyrocketed 479% as the company presented a drug candidate for Alzheimer’s disease at an investment conference. SAVA also showed heavy insider buying.

Chart source: Interactive Brokers

Another Bleichroeder holding, ArQule, Inc. (ARQL), was bought-out by Merck (MRK) for $2.7 billion ($20/share cash). ArQule is a precision-focused biotech targeting indications with high unmet medical need. That was a 120% gain for the hedge fund, based on the Sept. 9 filing price.

In recent days, Bleichroeder L.P. has added to the following positions in companies it has 10%+ stakes in. The holdings increases were disclosed in Form 4 filings.

Bleichroeder L.P. recently added to 10%+ stakes in Durect Corp. (DRRX) and Identiv Inc. (INVE).

Form4 DateCompanyTickerTransactionTrade Date Shares Avg. Price Total 
06-Feb-2020Durect Corp.DRRXMarket Purchase06-Feb-2020         75,000 1.65 $ 123,622
06-Feb-2020Durect Corp.DRRXMarket Purchase05-Feb-2020         74,998 1.69 $ 126,777
05-Feb-2020Identiv Inc.INVEMarket Purchase05-Feb-2020         10,113 4.9 $   49,554
06-Feb-2020Durect Corp.DRRXMarket Purchase04-Feb-2020         77,500 1.7 $ 131,510
05-Feb-2020Identiv Inc.INVEMarket Purchase04-Feb-2020         21,333 4.93 $ 105,136
05-Feb-2020Identiv Inc.INVEMarket Purchase03-Feb-2020       146,889 4.9 $ 719,776

Identiv Inc (INVE), with an $86 million market cap, is a provider of identity credentials and secure access solutions. After touching a high of $7.03 in Jan., INVE reported preliminary fiscal year 2019 results on Jan. 31 which disappointed investors, sending the stock to eight month lows. Bleichroeder added shares at around $4.9 on Feb 3-5.

After touching a high of $3.95 on Dec. 31, Durect Corp. (DRRX) skidded all the way to $1.57 on Feb. 6. A split FDA vote on bupivacaine — an extended-release solution for post-surgical analgesia — put pressure on the shares. Bleichroeder bought more at $1.65 – $1.70 on Feb. 4 – 6.

Bleichroeder L.P. will file a 13F by Feb. 15, allowing investors to get a detailed look at the hedge fund’s long portfolio.

Contact Mark about investing based on SEC filings and smart money disclosures.

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