Hedge Funds Discover CU Conversions
WASHINGTON – Several Hedge Funds are apparently scouting out credit union conversions and attempting to obtain membership in the converting credit union in order to get in on the ground floor of a future stock offering. In a phone conversation with The Credit Union Journal on Friday one Hedge Fund representative said his fund had made deposits in at least two converting credit unions and was seeking to establish membership in Lafayette FCU as it was switching to a mutual thrift. The inquiry came as an NCUA review of the Lafayette balloting uncovered as many as a dozen professional investors, speculators, who were able to establish membership in Lafayette through one of its select groups that have liberal membership standards. The speculators reportedly include a former president of one of the Federal Home Loan Banks, sources told The Credit Union Journal. Credit unions that convert to a mutual savings bank, then sell stock to the public usually give their former credit union members first crack at the stock before selling to the public at large, giving the former members the initial chance at any profits from a run-up in the stock price.