Tuesday, June 06, 2017

Palace Intrigue

W.P. Carey's Carey Credit Income Fund 2016 T and Carey Credit Income Fund 2018 T filed 8-Ks late on Friday with the following news:
On May 30, 2017, Mr. Mark M. Goldberg informed W. P. Carey Inc. (“W. P. Carey”) of his intended resignation, effective as of July 10, 2017, from his positions with W. P. Carey, the ultimate parent of the investment adviser to Carey Credit Income Fund (the “Master Fund”) and his positions as President of the Master Fund, Carey Credit Income Fund 2016 T (the “Company”) and each of the other feeder funds, to pursue other interests.

Additionally, Mr. Goldberg has resigned as the Chief Executive Officer and President of the Master Fund's investment adviser Carey Credit Advisors, LLC (“CCA”). Mr. Jason E. Fox, President of W. P. Carey, has been named Chief Executive Officer and President of CCA.
Mark Goldberg has been around non-traded alternative investments since the 1980s on both the broker dealer and product sides.  I view his departure as big news, and it's probably not random.  Carey is coming up on two months with no commission-based non-traded products available to sell, and had to send money back to investors in its Carey Credit Income Fund 2016 T when the offering closed on April 28, 2017, a move anathema to a product sponsor.  Carey Credit Income Fund 2018 T, which was declared effective by the SEC in October 2018, had to refile its prospectus and is pending SEC re-approval before it can offer shares.  The refiling clarifies Carey Credit Income Funds' accounting method for the ongoing trail commission it must pay broker dealers on T shares.  (The ongoing trail commissions are future obligations and a liability that lowers net asset value, and one more reason T shares stink.)  I can't help but wonder whether Goldberg is the fall guy for Carey's product missteps.


Ockham said...

I remember at the ADISA event where the announced his lifetime achievement award, they played a video of his career. One of the achievements highlighted in the video was creating the T share structure as it came to exist.

My hypothesis is that T shares in their current forms, however well intentioned, will prove to be an evolutionary dead end. The accounting that goes with the structure is indeed more absurd than typical accounting.

Over the long run technology will drive increased transparency into fees.

Rational Realist said...

Carey's actions yesterday squelched any palace intrigue. T shares without corresponding sponsor fee reduction will make more sponsors reevaluate non-traded sponsors.