A Californian hedge fund has rapidly built an almost 11 per cent holding in Pyne Gould Corporation but its intentions are a mystery.

This week Baker Street Capital, in Los Angeles, declared a 10.75 per cent stake in the old Canterbury firm, not that far behind the biggest shareholder and director, George Kerr, who controls 14 per cent through Pyne Family Holdings.

Only five weeks ago Baker Street Capital declared a stake of 5.35 per cent.

"We are a hedge fund based in California," Baker Street's managing member, Vadim Perelman, said yesterday but provided little other information.

The hedge fund generally had a policy of not commenting on its current investments. Perelman could understand why shareholders in PGC might want to know its intentions but transparency would be counter to its objectives, he said.

"Over the course of last year we got involved in PGC," he said.

An example of Baker Street Capital "activism" is its building of a 22 per cent stake in California ticketing company Tix Corporation.

At present it is embroiled in a bitter stoush with the Tix board which it is trying to dump.

A week ago Baker Street Capital issued an open letter to other shareholders in Tix, putting up five alternative directors.

It said that under the current board Tix shareholders had lost value, the share price had performed poorly and the company had made ill-advised purchases.

Asked if Baker Street Capital might do something similar at PGC, PGC chairman Bryan Mogridge said: "I don't think so but who knows."

Asked if he thought Baker Street might make a takeover offer, Mogridge said: "You can speculate all you want but you won't know until they do something, if they do anything at all."

Asked if they were friendly Mogridge said: "So far. I see no reason why they would want to do anything else. I think they will be OK. They are not a huge fund."

Yesterday PGC shares were steady at 35c, valuing the entire company at $75.8 million.

Since splitting off Marac Finance, PGC has slimmed to a collection of assets – about $90m of "bad" property loans bought from Marac two years ago, a 9.5 per cent stake in leading rural service firm PGG Wrightson, a funds management business under the Perpetual brand, a fund, Torchlight, investing in distressed businesses, and a funds management company, Equity Partners Asset Management, bought from Kerr two years ago.

Mogridge said representatives of the hedge fund came to the special meeting of PGC shareholders on May 20, where PGC shareholders voted in favour of PGC distributing its 72 per cent stake in Heartland New Zealand to PGC shareholders.

He said he had a "a brief chat" with them. "They were just interested in the company."

He gave them no more information than what was said to other shareholders at the meeting.

He told them "here's what we have got. The information we have given was in the report that went out with the inspecie distribution. And if you recall I said don't hold your breath, it's going to take some time."

Hedge funds could be long or short-term investors, Mogridge said. "Only they will know what they are doing. And they definitely haven't told me and they mostly won't tell anyone."

The only approach was at the meeting.

While he did not know how PGC came to the attention of Baker Street, he said this sort of interest was not unusual and "there's guys all around the world always looking at things".

A local broker said the hedge fund must see value in PGC that was not necessarily clear to others in the market.

- © Fairfax NZ News