Rival cash manager may gain from Sentinel’s woes

Diane Mix Birnberg, president of Chicago-based Horizon Cash Management LLC, didn’t plan it this way. Starting out in 1971 as a brokerage firm secretary who couldn’t type, the New Orleans native built a 36-year career that now has her overseeing $3.2 billion for some 110 clients. It’s a long way from her days at Vanderbilt University in Nashville, Tenn., where Ms. Birnberg hated math and majored in French and art history. “If you were a Southern girl, you didn’t think about careers,” said Ms. Birnberg, 58. “You thought about getting married and raising a family. It was just a different era.” Ms. Birnberg’s path has taken another twist with the recent collapse of Northbrook, Ill.-based rival Sentinel Management Group Inc., which last month filed for bankruptcy protection and also faces fraud allegations. Sentinel’s first employee when it launched in 1980, she now has the opportunity to capitalize on that firm’s demise, provided Horizon’s reputation isn’t sullied by the Sentinel fallout. “We’ve seen a lot of interest from Sentinel clients,” Ms. Birnberg said, conceding that recent market turmoil, tied to the subprime-mortgage calamity, may not leave Horizon unscathed. “I’m not going to say we’re fine — that would be Pollyannaish of me.” At Sentinel, Ms. Birnberg helped pioneer a market niche managing short-term cash holdings for futures industry clients. She departed in 1991 to start Horizon, taking some Sentinel customers with her and leaving ill will in her wake. Ms. Birnberg hasn’t spoken with Sentinel founder Philip Bloom in more than a decade, she said. Sentinel attorneys did not return phone calls seeking comment. Horizon is poised to gain customers in a market that caters to futures brokers and managers of futures-based funds, aiming to maximize short-term returns on cash reserves. Wall Street firms and banks also offer similar services but devote more attention to their traditional brokerage and investment banking businesses. Ms. Birnberg said she has contacted about five Sentinel clients, including Paris-based Capital Fund Management, about becoming Horizon customers, pending the resolution of bankruptcy issues. Horizon, which requires a $10 million minimum investment, previously had offered to manage Sentinel’s accounts and provide liquidity against them. Capital Fund Management, which said it could lose as much as $407 million as a result of its Sentinel investments, didn’t immediately respond to her offer, Ms. Birnberg said. “At this point, they’ve got much more on their plate without making any future commitments.” Sentinel’s downfall has been one of the more visible manifestations of the credit conflagration that has torched global financial markets since July. In mid-August, Sentinel halted customer withdrawals four days before it was accused by the Securities and Exchange Commission of secretly using at least $460 million of client money for its own purposes, including collateralizing a line of credit. Regulators said last week they could not account for another $505 million of Sentinel assets. Chicago-based hedge fund Citadel Investment Group LLC paid $317 million last month for cash and high-grade corporate bonds held by Sentinel. Creditors considered the price too low and filed suits to try to block the deal. Horizon aims to add another $1 billion in assets by yearend, make an acquisition and double its annual profit to $5 million by 2010, Ms. Birnberg said. She’s also seeking more hedge fund clients, which represent about 10% of Horizon’s assets and which are harder to recruit. Ms. Birnberg represents a stark contrast to the male-dominated, rough-and-tumble image of Chicago’s and New York’s grain, energy and financial futures industries. A collector of abstract expressionist art, 19th century French Orientalist paintings and miniature dollhouses, she expanded Horizon’s international portfolio by throwing lavish dinner parties for prospective clients at gourmet restaurants Le Boeuf sur le Toit in Paris, London’s Ivy and Hong Kong’s Royal Yacht Club. “I don’t mean this to sound like braggadocio, but at some time or another, most of the name people in the industry have been to one of my parties,” Ms. Birnberg said. Horizon client Mary McDonnell, chief executive of Chicago-based Geneva Trading USA LLC, appreciates Ms. Birnberg’s acumen with both finance and fine art. The Louis XV desk in Ms. McDonnell’s North Michigan Avenue office came from a favorite Parisian flea market of Ms. Birnberg. “She’s got an incredible Rolodex, because she’s worked day and night to get it,” Ms. McDonnell said. Ms. Birnberg, who worked for Lehman Brothers Inc. in Atlanta and New York before moving to Chicago, has decorated Horizon’s otherwise utilitarian River North offices with bronze statuary. “Every time we’ve been through one of these market disruptions, we’ve viewed them as an opportunity,” she said. “Whenever there is a lot of uncertainty and volatility in markets, people go to cash, and managing that is what we do especially well.” CNS