Key Takeaways
- • Common Sense Investment Management experienced redemption requests exceeding 90% of its $3.2 billion in assets under management following founder Jim Bisenius's arrest for soliciting a prostitute in late August 2013, according to sources familiar with the situation.
- • The Portland, Oregon-based fund of hedge funds is projected to retain less than $150 million in assets by year-end if redemptions proceed as requested, reducing the 22-year-old firm to a fraction of its former size.
- • Major institutional investors including the Fresno County Employees Retirement Association, Cincinnati Retirement System, and Oklahoma Municipal Employees Retirement Fund have initiated redemptions, with pension consultant Arnerich Massena recommending its clients withdraw as well.
- • Bisenius, 62, was arrested on August 29 in a prostitution sting in Tigard, Oregon, charged alongside eight other men; the firm's leadership attempted damage control by issuing a statement distancing the organization from the founder's conduct.
- • The mass exodus reflects institutional investors' heightened sensitivity to reputational and operational risk tied to fund leadership, transcending the personal nature of the underlying criminal charge.
Summary
Common Sense Investment Management, a $3.2 billion fund of hedge funds based in Portland, Oregon, has faced a near-total investor exodus following the arrest of founder Jim Bisenius for soliciting a prostitute. According to sources close to the matter, clients have requested redemptions representing more than 90% of assets under management. The arrest occurred on August 29, 2013, in a prostitution sting operation in Tigard, Oregon, where Bisenius was charged alongside eight other men.
The scale of redemptions is severe. If all requested withdrawals are honored, the 22-year-old firm will retain approximately $150 million or less by year-end—a reduction of over 95% from pre-arrest levels. Major pension funds and institutional investors have initiated redemptions, including the Fresno County Employees Retirement Association, Cincinnati Retirement System, and Oklahoma Municipal Employees Retirement Fund. Pension consultant Arnerich Massena has also recommended that its clients redeem from the fund, though the firm declined to specify which investors it advised to withdraw.
The fund's leadership responded to the reputational crisis in September by issuing a statement emphasizing that the founder's personal conduct did not reflect the firm's operations or portfolio management quality. Firm president Dean Derrah stated: "Jim Bisenius' recent personal transgression bears no reflection on this outstanding team of professionals or the quality of portfolio management at CSIM." However, this statement failed to stem the redemption tide.
Notably, not all redemptions were directly attributed to the arrest. Fresno County's administrator, Phillip Kapler, characterized the situation as both a personal issue and a potential business concern, noting that while the charge was personal in nature, any impact on organizational morale or key personnel retention could prove detrimental to investor interests. This reflects the institutional investment community's assessment that leadership scandals—even those rooted in personal conduct—can undermine operational stability and fiduciary confidence in fund management.
The scale of redemptions is severe. If all requested withdrawals are honored, the 22-year-old firm will retain approximately $150 million or less by year-end—a reduction of over 95% from pre-arrest levels. Major pension funds and institutional investors have initiated redemptions, including the Fresno County Employees Retirement Association, Cincinnati Retirement System, and Oklahoma Municipal Employees Retirement Fund. Pension consultant Arnerich Massena has also recommended that its clients redeem from the fund, though the firm declined to specify which investors it advised to withdraw.
The fund's leadership responded to the reputational crisis in September by issuing a statement emphasizing that the founder's personal conduct did not reflect the firm's operations or portfolio management quality. Firm president Dean Derrah stated: "Jim Bisenius' recent personal transgression bears no reflection on this outstanding team of professionals or the quality of portfolio management at CSIM." However, this statement failed to stem the redemption tide.
Notably, not all redemptions were directly attributed to the arrest. Fresno County's administrator, Phillip Kapler, characterized the situation as both a personal issue and a potential business concern, noting that while the charge was personal in nature, any impact on organizational morale or key personnel retention could prove detrimental to investor interests. This reflects the institutional investment community's assessment that leadership scandals—even those rooted in personal conduct—can undermine operational stability and fiduciary confidence in fund management.
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