Icahn Hedge Funds Post Loss, First Since Inception

Billionaire Carl Icahn's activist hedge funds posted their first quarterly decline since they opened three years ago because of volatile markets and losses on stocks including WCI Communities Inc. and Lear Corp.

The funds, run by New York-based Icahn Capital Management LP, together fell 1.5 percent in the third quarter, according to a Nov. 9 regulatory filing. The firm reversed more than $27 million of incentive fees as a result of the drop, according to the filing by Icahn Enterprises LP, parent of the fund-management business.

Results included $51.5 million of losses from WCI, the Bonita Springs, Florida, homebuilder that Icahn unsuccessfully sought to acquire in February. The funds had a $33.7 million loss on their investment in Lear, the Southfield, Michigan-based manufacturer of automotive seats that also rejected a buyout offer from Icahn.

Returns were ``impacted by volatile market conditions as well as equity positions related to consumer, real estate and financial sectors that represented losses for the quarter,'' Icahn said in the filing with the U.S. Securities and Exchange Commission. The Standard & Poor's 500 Index rose 1.6 percent in the quarter, reversing a loss that was as much as 6.4 percent on Aug. 15 amid credit-market turmoil.

Icahn buys stock in companies that he deems undervalued, which have included Time Warner Inc. to Motorola Inc., then pushes management to take steps to boost share prices. Since starting in November 2004, the Icahn funds have risen an average of 25.8 percent a year through this year's third quarter.
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