Former SEC Chief Launches Activist Fund

Richard Breeden, who ran the Securities and Exchange Commission from 1989 to 1993, has launched a $1.25 billion hedge fund, according to a regulatory filing. The fund, Breeden Capital Partners, will focus on driving corporate governance reform in public companies.

While the fund is targeting an activist strategy, the new vehicle will likely have a private equity bent. Breeden is being joined by the guts of Milestone Capital, an $88 million buyout fund based in Washington, D.C. Three of Breeden Capital’s partners recently left Milestone, including Milestone Founder and Managing Director Steven Quamme, Vice Chairman David Mimran and Managing Director Faisal Hassan. Milestone had made a name for itself in the restaurant segment of the private equity market with investments in companies such as Taco Bueno Restaurants, Bertucci’s Inc. and Papa John’s.

Breeden Capital will also employ James Cotter, Robert Fields and Michael Stellwagen.

Industry experts have been skeptical about Breeden’s ability to attract investors. The former SEC chief has never run an investment vehicle. With that said, Breeden has acted as a high-level monitor of several troubled companies. He oversaw MCI’s climb out of bankruptcy, led an investigation into insider abuses at Hollinger International and tightened KPMG’s ethics policy after it settled a regulatory dispute over the firm’s role in setting up tax shelters.

So far, the Greenwich, Conn.-based firm has raised a mere $3.5 million from three accredited investors, according to the regulatory filing. The firm was unable to comment on the fundraising process, citing disclosure concerns. In regards to fundraising, a spokesperson said to watch for another filing in September.

The New York Times reported the firm would take a 2% management fee and an additional 20% off the top of its returns.

Breeden Capital is not the only new activist fund with a private equity lineage. In June, Buyouts reported that Henry Druker, formerly of Questor Management, had launched his debut activist investment fund, seeking $1 billion. Druker’s new firm, Druker Capital, is backed by auto dealership magnate Billy Joe “Red” McCombs.—A.H.