A group of partners at Cadwalader Wickersham & Taft stand to lose significant sums in an investment made in a Lehman Brothers private equity fund.
The news comes as Cadwalader nears the end of a financial year during which it has made two rounds of redundancies and which is expected to result in a significant drop in the firm’s average profit per equity partner.
The Lehman Brothers Merchant Banking Partners IV, which was raised last year, is a $3.3bn global fund focused on making significant minority stakes in small to mid-cap companies in the Americas, Europe and Asia.
With the collapse of Lehman and the downturn in the private equity market, the group of Cadwalader partners face losing much of their stakes in the fund.
The group, which includes some of Cadwalader’s most senior partners, are thought to have invested a total of around $3m in the fund at an average of around $250,000.
While institutional investments by law firms are rare, group investments of this kind are not unusual among partners, both as an investment and as a way of showing good faith with a client. Lehman, prior to its collapse, was one of Cadwalader’s biggest clients.
However, it is understood that the partners’ investment in this fund was designed solely as a way of maximising a return as opposed to cementing the firm’s relationship with the bank.