(Reuters) - The president and co-manager of Fairholme Capital Management LLC has resigned, as the $8.9 billion mutual fund firm continues to suffer from bets on financial stocks and a real-estate development company.
Charles Fernandez, who was also a director, stepped down on October 17 for what Fairholme chief Bruce Berkowitz said were “personal reasons.”
Fairholme also made two new appointments: Fred Fraenkel, the former head of research for Lehman Brothers, will become chief research officer, and Dan Schmerin, a former Treasury Department official who oversaw its Public-Private Investment Program, will become director of special situations.
The changes come after a rocky year for Berkowitz’s flagship Fairholme Fund (FAIRX.O), which has lost 26 percent of its net asset value this year through October 21.
The performance is due to bets that have backfired on the insurer American International Group Inc (AIG.N), Bank of America Corp (BAC.N) and Florida-based landowner and developer St Joe Co (JOE.N). AIG, Fairholme’s largest stock holding, is down 50 percent so far this year, while Bank of America has declined 52 percent and St Joe is off 32 percent.
In a statement, Berkowitz said Fairholme will “continue to stay the course” on its financial-stock investments.
Fernandez also resigned from his position as a board member of St Joe, according to a regulatory filing. Fairholme is the biggest shareholder of the company.
Fernandez’s departure on October 17 came ahead of a report in the financial publication Barron’s on Sunday that was critical of his tenure.
Reporting by Lauren Tara LaCapra in New York, editing by Maureen Bavdek