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Hedge Fund News: Citadel, Ray Dalio, Mitt Romney

Citadel hires DE Shaw marketer (eFinancialNews)
Chicago-based asset manager Citadel has hired a new a managing director and head of Americas distribution, as the firm seeks to capitalise on the strong recent performance of its flagship funds. John Rustum joined in mid-May from hedge fund manager DE Shaw, where he had worked for seven years. A spokeswoman for Citadel, which encompasses an asset management division and a capital markets business, confirmed the hire.


The Murphy Mix-Up And Democrat Hedge Fund Contributions (HedgeCo)
Bysiewicz ran an add accusing Murphy of receiving around $700,000 in campaign contributions from financial firms, saying he has more “hedge fund money than any other Democrat in Congress.” Murphy says his primary rival’s new TV ad is based largely on false claims and hypocrisy. …Bysiewicz’s campaign manager eventually conceded in a statement, saying, “Obviously, the research team could have been a little more thorough.”

Van Eck Announces Acquisition of a Hedge Fund Beta Business (BusinessWire)
On June 29, 2012, Van Eck Associates Corporation acquired a Hedge Fund Beta business and team from Lyster Watson & Company, and will be offering a suite of strategies called Trackers. Trackers are hedge-style “beta” strategies based on indexes developed using a patented methodology and proprietary intellectual property. Each index seeks to capture the beta of a specific hedge fund strategy, and the Trackers team focuses only on those hedge fund strategies whose returns can be statistically replicated using tradable risk factors represented by US-listed ETFs. The team believes that not all hedge fund strategies are conducive to this approach.

Upstart hedge-fund manager making waves in Wisconsin (WashingtonTimes)
Wisconsin’s U.S. Senate primary is less than a month away, and an upstart hedge-fund manager and tea party favorite is making a move to become the latest Republican political newcomer to earn a seat in the upper chamber. Eric Hovde has surged in recent polls in the four-way GOP race, drawing closer to longtime frontrunner and former Gov. Tommy G. Thompson ahead of the Aug. 14 primary.

Key witness in history’s largest hedge fund insider trading case gets 2 years’ probation in NY (DuluthNewsTribune)
A former financial consultant-turned-government witness was spared prison time Thursday and given only two years of probation after prosecutors credited him with helping convict a pair of Wall Street titans on insider trading charges. Anil Kumar had pleaded guilty in 2010 to conspiracy to commit securities fraud and other charges and agreed to cooperate in the investigation of two old friends _ disgraced hedge fund manager Raj Rajaratnam and former Goldman Sachs board member Rajat Gupta. Both were convicted at separate trials in federal court in Manhattan on charges accusing Gupta of feeding Goldman secrets to Rajaratnam.

New Dow Jones Credit Suisse Hedge Fund Index Commentary Offers Insight into June Hedge Fund Performance (MarketWatch)
The Dow Jones Credit Suisse Hedge Fund Index finished down 0.40% in June. A new monthly commentary offers insight into hedge fund performance through the month of June. Some key findings from the report include: Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished May down 0.40%, with 5 out of 10 strategies in positive territory; In total, the industry saw estimated outflows of approximately $2.53 billion in June, bringing overall assets under management for the industry to approximately $1.73 trillion;

Hedge funds down but edge out S&P 500, Nasdaq (MarketWatch)
Hedge funds lost money in the second quarter of the year on lingering European uncertainties, but still managed to fare better than the S&P 500 and the Nasdaq Composite indexes, according to industry data released Thursday. The HFRI Fund Weighted Composite Index, made up of 2,200 funds with at least $50 million under management, slid 2.7% in the second quarter, HFR said in its HFR Global Hedge Fund Industry Report.

GlobeOp: Hedge Fund Redemptions Fall In July (Finalternatives)
The GlobeOp Financial Forward Redemption Indicator for July shows notifications of 2.18%, down from 3.71% in June. “Forward redemptions remain low, this month’s percentage being one of the lowest in the history of the Indicator,” said Bill Stone, chairman and CEO of SS&C Technologies, which recently purchased GlobeOp Financial Services.

Japan short rule makes $2.2 bln ANA offering hard sell overseas (Reuters)
Japan’s regulatory crackdown on insider trading depressed hedge fund interest in All Nippon Airways’ (ANA) $2.2 billion share offering, highlighting a new challenge for Japanese firms looking to raise funds overseas. There were two surprises in the terms announced by the airline this week: an unusually high discount of 4.2 percent and an allocation split that left just 13 percent in the hands of overseas investors, less than half the targeted 30 percent.

This Hedge Fund is Cutting 59 Jobs (HedgeCo)
Stark & Roth LLC has announced that it will reduce its workforce in a “series of staff reductions.” According to The Business Journal, the St. Francis, Wisconsin-based hedge fund will begin by eliminating 28 employees this week. The company will also close three of its hedge funds — Shepherd Investments International, Shepherd Guardian and Stark Investments — as a result of its dwindling AUM. In total, Stark & Roth plans to eliminate 59 positions. It is currently unknown when the remaining jobs will be removed.

Will John Griffin send David Einhorn chocolates? (MarketWatch)
It has been almost two years since David Einhorn, manager of the $7.8 Billion Greenlight Capital hedge fund presented his case for shorting The St. Joe Company JOE -0.35% . During his speech at the Value Investing Conference in October of 2010, Einhorn skewered the company. He mocked prices they paid for land, the hiring of a Disney executive and claims about land near Port St. Joe, a town in Northwest Florida. JOE claimed a new airport was to be built nearby, but the facts show that JOE had agreed to compensate Southwest Airlines LUV -2.40% for any expenses incurred to move operations there.

Top Tech Picks From a Hedge Fund Guru (CNBC)
After reporting second-quarter earnings on Wednesday, technology bellwhether Intel cut its revenue forecast for 2012 amid slowing PC sales and a wavering global economy. Despite weak demand in the PC industry the tech sector is up for a second day. In light of the news, Philippe Laffont, founder and portfolio manager of Coatue Management, offered investors his top picks in the sector, as well as stocks to avoid.

Being Politically Invested (HedgeFund)
When does an investor conference become a political salon? That happens when the first panelist at Wednesday’s CNBC/Institutional Investor Delivering Alpha Conference was Secretary of Treasury Timothy Geithner.

Gottex assets down 2.1% ($7.41bn) in Q2, flagship funds of hedge funds post positive returns YTD (Opalesque)
In today’s trading statement for the second quarter of 2012, Gottex Fund Management Holdings Ltd, an independent global fund of funds group incorporated in Guernsey and listed in Switzerland, revealed that its flagship fund of hedge fund products continue to outperform their benchmark and post positive returns YTD. This was due to “exceptional performance” by alternative credit strategies (up 5.9% YTD), and equity portable alpha strategies (up 11.2% YTD). Gottex’s core market neutral strategies were up around 2% YTD and have continued to outperform their benchmark as they did in 2011, according to the statement. Gottex expects its core flagship market neutral plus product (1.1% away from its high water mark at the end of June) to start accruing performance fees in H2.

Hedge Funds See Net Inflows Of $4B In Q2 (Finalternatives)
Investors poured $43.3 billion into hedge funds in Q2 2012 for net inflows of $4.1 billion, according to the latest figures from Hedge Fund Research. The second quarter totals bring net first half inflows to over $20 billion. That said, hedge fund capital declined 1.3% from a record $2.13 trillion in Q1 to $2.10 trillion in Q2 as the HFRI Fund Weighted Composite Index for the second quarter declined 2.7%.

Ex-Goldman mortgage chief plans foreclosed home fund (Reuters)
Former Goldman Sachs Group Inc. (GS.N) executive Donald Mullen, one of the architects of the subprime mortgage trade, is trying to raise at least $500 million for a fund that will buy foreclosed homes with an eye toward renting them out. Mullen, who until January was head of the credit and mortgage business inside Goldman’s securities division, began marketing his Fundamental REO Access fund in earnest about a month ago, said seven people familiar with the matter, but who did not want to be identified because they do not work for the upstart fund.

Woodbine Capital Has Another Disappointing Month, Down 2% in June (ValueWalk)
Woodbine Capital Advisors LP is a hedge fund founded by two ex traders from George Soros’ Soros Fund Management. Josh Berkowitz and Marcel Kasumovich launched the fund in 2008. We noted last month, that the fund was experiencing heavy redemptions, as initially reported by Michelle Leder of the NYPost. Assets under management declined from over $3 billion to $500 million.

Armada Capital Pan-Latin Long/Short Equity Fund posts strong first half 2012 (Opalesque)
Armada Capital has been an independent investment advisor managing Latin American investment portfolios since 2008. The firm was founded as a joint venture between Alejandro Rojas and ING Alternative Asset Management. In 2012, ING exited its Latin American businesses and the firm. Now, Armada is wholly independent and managed by Rojas and Eric Anderson who was originally responsible for establishing the joint venture for ING and has since left the company to act as co-Portfolio Manager with Rojas. Together, both men have nearly 40 years of experience working with Latin American hedge funds, mutual funds and the investor community throughout the region. Rojas managed the Maya Capital Latin America Hedge fund in 2006 and later merged it with Armada. Anderson served as the CIO of ING IM Latin America where he was responsible for some $70bn in multi-asset portfolios across the region. I spoke with Anderson about the firm and the fund.

No Hedge Funds Inside Banks (SeekingAlpha)
This is not an editorial. Editorials come too late. They usually come after the fact. This is an article for those investors who have decided they don’t want hedge funds inside the banks they invest in. If AIG (AIG) was the volcano when it comes to derivatives disasters, then JPMorgan (JPM) is the unwelcome aftershock. We are told that JPMorgan has a huge balance sheet, and the loss is trivial, but AIG’s shareholder equity dropped from $95 billion to $52 billion in one year.

Leona M. and Harry B. Helmsley Charitable Trust goes long the Chilton Global Natural Resources fund (PIOnline)
The $3.659 billion Leona M. and Harry B. Helmsley Charitable Trust has significantly increased its investment in the Chilton Global Natural Resources fund. According to the foundation’s 990-PF, the foundation had $117.83 million invested in the fund as of March 31, 2011, the most recent data available, up from $11.82 million at March 31, 2009. This seems to be part of a strategy to increase the foundation’s overall exposure to alternative investments. The trust now has $864 million in hedge fund and private equity investments up from $159 million as of March 31, 2009. Other hedge fund and private equity managers include Marathon-London, Och-Ziff, J.P. Morgan Asset Management, Highbridge and Brevan Howard.

SEC Charges Chicago-Based Consulting Firm and Executives With Accounting Violations (SEC)
The Securities and Exchange Commission today charged a Chicago-based consulting firm and two of its former executives with accounting violations that overstated the company’s income for multiple years. The SEC found that Huron Consulting Group Inc., a provider of financial and operational consulting services to clients in various industries, failed to properly record redistributions of sales proceeds by the selling shareholders of four firms acquired by Huron. The selling shareholders redistributed the money to employees at those firms who stayed on to work at Huron as well as other Huron employees and themselves.

Crop Traders Extend Bullish Streak On U.S. Drought: Commodities (Bloomberg)
Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century. Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show.

SEC extends review period on JPM’s copper ETF plan (Reuters)
The U.S. Securities and Exchange Commission has extended the consultation period on JP Morgan Chase & Co’s controversial plan for an exchanged-traded fund (ETF) physically backed by copper amid mounting opposition from U.S. consumers of the metal. In a notice issued late on Thursday, the regulator asked for more feedback from the U.S. bank that has pushed to launch the fund for almost two years and from copper fabricators and Red Kite, a major hedge fund and physical trader, who have opposed the product, claiming it would disrupt supply and inflate prices.

A Short Explanation For Why Investors Are Still Leaving Their Money In Hedge Funds Despite Dismal Returns (BusinessInsider)
Hedge funds have had a rough last few months. Even the once wildly profitable hedge fund titan Ray Dalio saw his fund down 2.7% for the first half of 2012. Despite all that bad news, this morning, FINalternatives, reported that the GlobeOP Financial Forward Redemption Indicator for July shows that client redemption requests for hedge fund investments are at near historic lows for the GlobeOP Indicator.

Trinity: There is no panacea from counterparty risk in today’s world (Opalesque)
Trinity Fund Administration, the boutique Dublin-based fund administrator, issued the latest in a series of articles on corporate governance – Counterparty Exposure Risk. Given the recent news of Peregrine Financial Group (PFG), counterparty risk is a very timely issue and the article highlights and discusses the key areas of concern surrounding this – particularly the implications for fund managers.

SEC Veteran Michele Wein Layne Named Director of Los Angeles Office (SEC)
The Securities and Exchange Commission today announced that Michele Wein Layne has been named Regional Director of the Los Angeles Regional Office and will begin her new role immediately. Ms. Layne has been an Associate Regional Director for Enforcement in the L.A. office since 2005. She began her SEC career 17 years ago as a staff attorney in the Enforcement Division and has worked her way up the ranks into the office’s most senior position. Ms. Layne has been serving as the Co-Acting Regional Director since the departure of prior office director Rosalind Tyson earlier this year.

JANA shifts co-founder, co-PM Gary Claar to advisory role (Absolutereturn-Alpha)
Changes are coming to Barry Rosenstein’s $3.2 billion JANA Partners. Gary Claar, who cofounded the event-driven firm with Rosenstein in 2001 and was co-portfolio manager for his entire tenure, has been shifted to a lower-profile “senior advisor” role, according to investor documents obtained by AR. Claar will no longer have any portfolio management responsibility, a person familiar with the firm said. Decisions will run through Rosenstein and co-PM David DiDomenico, who was hired two years ago as part of the start of what the firm calls “JANA 2.0,” a post-financial crisis rebooting effort. Earlier in his career, Claar founded…

Solus Takes Aim at Madoff Estate (InstitutionalInvestor)
Solus Alternative Asset Management, a $2.5 billion fund manager specializing in credit and distressed assets, has launched a new fund that has invested in claims on bankruptcy and litigation cases, including creditor claims against Lehman Brothers, Nextel and the estate of Bernard Madoff. The Solus Recovery Fund closed on July 2 with just under $500 million in committed capital, according to investor materials obtained by Institutional Investor.

SEC Charges CEO With Insider Trading in Secondary Offering of Company Stock (SEC)
The Securities and Exchange Commission today charged the chairman and CEO of a Santa Ana, Calif.-based computer storage device company with insider trading in a secondary offering of his stock shares with knowledge of confidential information that a major customer’s demand for one of its most profitable products was turning out to be less than expected. The SEC alleges that Manouchehr Moshayedi sought to take advantage of a dramatically upward trend in the stock price of STEC Inc. by deciding to sell a significant portion of his stock holdings as well as shares owned by his brother, a company co-founder. The secondary offering was set to coincide with the release of the company’s financial results for the second quarter of 2009 and its revenue guidance for the third quarter.

Mitt Romney hopes overseas trip will show him as statesman (WashingtonPost)
Mitt Romney plans to depart next week for a visit to Britain, Israel and Poland, and the Republican presidential candidate hopes the trip will help him project the aura of a statesman and signal to voters back home that he would make a plausible commander in chief. He will listen to leaders of important U.S. allies, make symbolic appearances at historical sites and build personal relationships. He plans to meet with British Prime Minister David Cameron at 10 Downing St. and catch up with Israeli Prime Minister Benjamin Netanyahu, an old friend from their days as business consultants, while aides are preparing speeches for him to give in Israel and Poland.

Nouriel Roubini US economic recovery is a dangerous mirage (DemocraticUnderground)
While the risk of a disorderly crisis in the eurozone is well recognized, a more sanguine view of the United States has prevailed. For the last three years, the consensus has been that the US economy was on the verge of a robust and self-sustaining recovery that would restore above-potential growth. That turned out to be wrong, as a painful process of balance-sheet deleveraging – reflecting excessive private-sector debt, and then its carryover to the public sector – implies that the recovery will remain, at best, below-trend for many years to come. Even this year, the consensus got it wrong, expecting a recovery to above-trend annual GDP growth – faster than 3%. But the first-half growth rate looks set to come in closer to 1.5% at best, even below 2011’s dismal 1.7%. And now, after getting the first half of 2012 wrong, many are repeating the fairy tale that a combination of lower oil prices, rising auto sales, recovering house prices, and a resurgence of US manufacturing will boost growth in the second half of the year and fuel above-potential growth by 2013.

Top Holdings of Carl Icahn, An American Business Magnate (Kapitall)
Carl Icahn has been shaking up markets for more than 30 years, but 2011 was an outstanding year when he made $2 billion in trading profits, ranking him #3 among America’s top traders. He recently returned his hedge fund’s outside client capital and decided to focus on investing his own funds and that of his employees. His fund was up 35% in 2011 thanks to successful bets on companies like Motorola Mobility and El Paso. The chess player’s publicly-traded holding company, Icahn Enterprises, invests in real estate, metals, rail cars and automotive companies. As of March 2012 his net worth is estimated to be $14 billion.

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