Settlement talks are underway between Pine River Capital of Minnetonka and Steven Kuhn, its former star mortgage-securities portfolio manager.
Pine River sued Kuhn last September in U.S. District Court over compensation and ownership issues.
Pine River was a hot investment manager after the Great Recession thanks to Kuhn’s 2008-13 bet on the devalued mortgage market, It has been trying to stanch client withdrawals and lagging performance that has driven down assets under management from $15 billion to around $9 billion since 2015.
Pine River dismissed Kuhn last year after months of negotiations, alleging he demanded more compensation than he was owed under a partnership agreement. Kuhn and Pine River founder Brian Taylor, in dueling lawsuits, also disagreed over Kuhn’s plan to give up millions in future bonuses in exchange for increased ownership.
In the 2009-13 gravy years, Kuhn generated outsized performance and tens of millions of dollars in annual profits for the partners, according to his counter claim against Pine River.
Kuhn upset some Pine River investors when he announced in 2016 that he was leaving the firm to pursue philanthropy, according to a Pine River lawsuit against Kuhn. Kuhn subsequently sued Pine River this year.
Kuhn took a $3.375 million reduction in his annual bonus for 2013 for a less than 1 percent increase in his equity in the firm to about 18 percent. Kuhn charged in his suit this year that Taylor had breached an agreement that would have allowed Kuhn to increase his ownership from 5 percent to 25 percent.
The other big issue is how much Kuhn is owed for his equity in the now lower-valued firm.
The shrunken firm once boasted 400-plus employees and offices in New York, London, Hong Kong and Kuhn’s residence of Austin, Texas. Several partners have left and there have been unspecified layoffs.
U.S. District Judge Ann Montgomery agreed to delay a pretrial meeting on Sept. 20 after lawyers for both parties said they were close to a settlement that would result in dismissal of all claims.
Kuhn grew up in Columbia Heights and graduated from Harvard College in 1991. He was a mortgage-bond investor for Wall Street’s Goldman Sachs before joining Pine River in 2008.