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Hedge Fund News: David Einhorn, Mitt Romney, Philip Falcone

GREENLIGHT CAPITALEinhorn’s Greenlight Posts 4 Percent August Gain (InstitutionalInvestor)
David Einhorn’s Greenlight Capital posted a 4 percent gain in August. This put the hedge fund manager up 9.7 percent for the year to date. The early results come from an investment account of Greenlight Capital Re — an insurance company controlled by Einhorn — that is managed by a Greenlight Capital entity. It reported that at the end of August, the largest disclosed long positions in its investment portfolio were Apple, Arkema, General Motors, gold, Marvell Technology Group and Seagate Technology. These were the same largest reported positions at the end of July, except for Arkema, a chemical maker.

Man Group debuts computer-driven bond hedge fund (Reuters)
Hedge fund manager Man Group has launched a computer-driven fund that will try to make money trading government bonds despite the ultra-low yields on offer, the latest step by the struggling firm to try and revive its fortunes. The Nomura Man Systematic Fixed Income fund, which launched in July with $50 million of external investor money, uses algorithms from Man’s $16.7 billion flagship fund AHL to help it trade interest rate and bond futures, currencies and interest rate swaps around the world.

Canada’s Hedge Funds Are Worthy of the Name (AllAboutAlpha)
A recent comparative study of the performance of Canada’s hedge funds and mutual funds makes the case that both have outperformed benchmarks over the course of the business cycle, and that the two fund classes produce “almost the same returns” in bull markets, but that Canada’s hedge funds are markedly superior to its mutual funds in level or bearish markets. The comparison, prepared by Amitesh Kapoor, of India’s Lovely Professional University, relies on data from Hedge Fund Research Inc., with its 100 indexes of performance which (as Kapoor puts it) range “from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus.”

New hedge fund offers crossover appeal to both green and Islamic investors (Opalesque)
Communications and consultancy firm Sustainable Options Ltd has announced the launch of the Sustainable Resources Fund, an open ended hedge fund that offers appeal to both green and Islamic investors. The fund aims to raise $100m for investment in a mix of agro-forestry, land and sustainable agricultural sectors. In an e-mailed statement, Sustainable Options’ Founder and Managing Director Stuart Andrews said that the fund has appointed Alpha Wealth Management as investment manager and Apex Fund Services as fund administrator. The combined skills of Alpha Wealth Management and Apex Fund Services are expected to provide prudent diversified investments across geographically diverse regions, different species and plantations to reduce project specific risk. “Utilising tough ethical, environmental and commercial criteria to each investment, their mission statement is to generate wealth through sustainable resources,” Andrews said.

2012 is ‘make or break year’ for Asian hedge fund space, Part One (Opalesque)
As the hedge funds industry shrinks, Singapore-based data provider GFIA said that 2012 is a “make or break year” for Asian hedge funds. Historical overview of Asian hedge funds industry Between 2003 and 2004, global investors began to take serious notice of Asian hedge funds. Around that time, the region’s hedge fund industry saw major allocations and the space rapidly grew with better known managers getting allocations. GFIA said there were at least136 hedge funds in Asia with more than $200m under management in 2005. By end 2007, there were an estimated 35 hedge funds with over $1bn of hedged assets run from the region.

Hedge Fund Bulls Push U.S. Gasoline To Labor Day Record (Bloomberg)
Hedge funds raised bullish bets on gasoline to more than a three-month high, helping push prices at the pump to record levels for the U.S. Labor Day holiday, as Hurricane Isaac roared toward the Gulf of Mexico and a deadly blast closed Venezuela’s largest refinery. Money managers increased net-long positions, or wagers on rising prices, by 3 percent in the seven days ended Aug. 28, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Aug. 31. They were the highest since the week ended May 1.

Schroders launches Global Macro Bond Fund on GAIA platform (HedgeWeek)
Schroders has launched another internally-managed fund, Schroder GAIA Global Macro Bond, on its Ucits platform, Schroder GAIA (Global Alternative Investor Access), which is designed to gve investors easier access to hedge funds. The fund aims to deliver an annualised gross excess return of eight per cent per annum over Libor using currency, sovereign and credit strategies, and is scheduled to launch in October 2012.

Hedge Fund Manager Fined $2m for Insider Trading (InAudit)
A district court in New Jersey has convicted a hedge fund firm Clay Capital Management, LLC and its former Chief Investment Officer guilty for their roles in an insider trading scheme involving the securities of three companies – Moldflow Corporation, Autodesk, Inc. and Salesforce.com, Inc. The Court ordered Clay Capital and Turner to pay $2.1 million in illicit gains.

Ex-Winton scientist sets up trend-following CTA alternative Ucits fund (HedgeFundsReview)
Munich-based asset manager Aquantum, set up by former Winton senior scientist Thomas Morrow, has designed a CTA program that will open to investors later this year. Morrow left Winton in 2008 to establish an asset management business. However, he was persuaded by a former colleague, who had moved to Royal Bank of Scotland, to build quantitative indexes and license them to the bank. Aquantum started life as an indexing business, based in Luxembourg.

Analysis / IDB’s two mistakes (Haaretz)
When we try to analyze the reason for troubles of IDB Holding Corp., one of Israel’s most massive companies, we see two the same two causes over and over. The first is the critical error made by Nochi Dankner, who holds the controlling stake in IDB, when he had Koor Industries buy shares in Credit Suisse. Dankner thereby turned Koor into a hedge fund, for all practical purposes, at a time when he had no experience in managing such funds.

CONTROVERSIAL BANKER TO BUILD GOLF COURSE (GolfClubManagement)
A controversial Australian hedge fund manager has ignored the advice of the Scottish Golf Union (SGU) and decided to build a new golf course in Scotland. Greg Coffey, 41, who is worth nearly half a billion pounds, bought the 12,000-acre Ardfin Estate, which includes Jura House Garden, a unique walled garden that, as a tourist attraction, had played a pivotal role in the Isle of Jura’s economy, for £3.5 million in 2010 and closed it down within a year. Several local people protested against the decision, while Coffey received personal criticism as it is believed he has only visited the island twice since the acquisition.

Fraud Continues to Pervade Mortgage Industry, Helped Along By MERS (FireDogLake)
While housing analysts revel in numbers about home prices and construction starts, I have been trying to focus on the realities of an unhealthy market, with hedge fund house-flippers and shadow inventory driving the so-called “recovery” more than anything fundamental. …These are the kind of stories I like to highlight when asked why we should be moved to care about foreclosure and servicing fraud, since it only impacts so-called “deadbeats” who bought too much home. When someone without a mortgage can get a foreclosure notice, when a bank without an interest in a home can generate fees off a property in foreclosure, when a sampling of 35 Wells Fargo loans finds that the actual monthly payment cannot be substantiated on 34 of them, when a family’s mortgage payment misplaced by their bank leads to a foreclosure two years down the road, you can understand that these problems are in no way limited to those “deadbeats.” In fact, they’re not limited to those in foreclosure. Everyone with a mortgage – everyone with a home – is a potential target for fraud and abuse.

Plugging the Leaks (INToday)
At their best, stock exchanges are meant to create information symmetry, so that everyone has access to same facts at the same time. However, as the proliferating insider-trading scams show, the reality is far different than this. We all have heard about the trial of former McKinsey chief Rajat Gupta in the US, as well as the imprisonment of Galleon hedge fund founder Raj Rajaratnam, for insider trading. However, in India, insider trading is not a criminal act and, more importantly, nobody has ever been jailed for it.

Marts rally, but Street gifts for O fall off (NYPost)
In the midst of a US economy bedeviled by stagnant housing prices and high unemployment, Wall Street is one of the few places in the country that is better off than it was four years ago. The Standard & Poor’s 500 Index is up 65 percent under President Obama — the largest gain for any first-term president since Dwight D. Eisenhower over the comparable stretch from 1953 through August 1956. “Within the banking industry, Obama has made people an enormous amount of money, and they seem to have forgotten that,” said a hedge-fund manager who supports Obama.

Domestic firms get easier access to A-shares (AsianInvestor)
Trust companies and insurance firms have been given more flexibility to trade Chinese listed stocks, as part of regulatory moves to boost institutional participation in, and optimise the structure of, domestic capital markets. This was confirmed by two circulars issued by China Securities Depository and Clearing Corporation (CSDCC) on Friday, which both came into effect that day. …Trust companies launch private-placement fund products, on which hedge fund managers act as investment advisers. It was costly to issue new hedge fund products when trust firms were not allowed to open new securities accounts.

New Rules For Apple Investing (Forexpros)
I woke up early this morning, 3:30 AM, and couldn’t fall back to sleep. This is always a sign some idea is bubbling below the surface. I sat down at the computer and opened my stocktwits home page and noticed I had 4 new followers. I instinctively always check out who my new followers are… One was an author and former hedge fund manager named Ravee Mehta who had just written a book called “The Emotionally Intelligent Investor.” I checked it out on Amazon Kindle, liked it, and downloaded it. I devoured this book, scanning through all the best chapters. 90 minutes later I was done. It totally resonated with me. I thought, “I should have written this book.” That means I loved the book, Ravee.

Community group close to a deal on Great Barrington Fairgrounds (BerkshireEagle)
For 15 years, a local group has been quietly working to convert the abandoned Great Barrington Fairgrounds into a community center for recreation and agriculture. Now, the group says it is close to a deal to purchase the land from its current owner, a Connecticut-based hedge fund. The Fairgrounds Comm unity Development Project took out an option to buy the 57-acre property in early July. The group has until Oct. 15 to close the deal. “We’re very confident at this point,” said Bart Elsbach, a member of the group.

The dangers of anecdotal evidence (Economist)
LIKE many Britons, your blogger spent two weeks in late August in Spain (just south of Barcelona). My knowledge of Spanish is about as rudimentary as Todd Akin’s knowledge of human biology. But in theory, this was an interesting opportunity to see how the Spanish economy was coping with the pressure of austerity and bank funding worries. All looked fine; the beaches were packed, as were the bars and restaurants. Two days after my return, however, the regional government (Catalonia) applied to Madrid for €5 billion in aid. This discrepancy was hardly surprising. I was staying at the peak of a season in a resort town populated mainly by fellow Britons and the French; the anecdotal evidence I was absorbing was little guide to the health of Spain itself. This is a common problem. Wander the streets near The Economist and London is booming; but London is not all of Britain. It attracts a lot of the tourists, and the Russian billionaires, and the hedge fund elite. Life in, say, Bradford may look a lot different.

Dubai Drydocks protected in landmark case (FT)
Drydocks World, Dubai’s ship overhaul company, made history last week in a case that used specialist insolvency legislation to force through a financial restructuring of its $2.2bn debts. …But the actions of predatory hedge funds, which bought the debt of distressed companies in the secondary market with a view to being repaid before other creditors, changed the landscape. Some of these funds planned to threaten legal action against the assets of indebted companies, bankers say.

State Street Corporation – SWOT Analysis – 2012 Report Is the Essential Source for Top-Level Company Data and Information (HeraldOnline)
State Street Corporation – SWOT Analysis company profile is the essential source for top-level company data and information. State Street Corporation – SWOT Analysis examines the company’s key business structure and operations, history and products, and provides summary analysis of its key revenue lines and strategy. State Street Corporation (State Street or the group) is a financial holding company. It operates through subsidiaries, including principal banking subsidiary State Street Bank and Trust Company. The group provides fund accounting, custody, investment management, securities lending, transfer agency services, hedge fund services and operations outsourcing for investment managers.

Permissive attitude to terrorism linked groups imperils many economies – GL (DailyNews)
While the grave repercussions of economic crime are fully appreciated today, approaches to combating this category of crime are incomplete and defective mainly because some significant types of offenders have escaped notice and remain entirely outside the ambit of preventive and penal measures developed by the law, External Affairs and former Distinguished Visiting Fellow of Christ’s College, University of Cambridge, Professor G L Peiris said. …The main focus of the law and regulatory agencies continues to be on dishonest stockbrokers, auditors, hedge fund managers, bank and public officials, as well as corporate personalities who are identified as the principal, if not sole, perpetrators of economic crime.

Mubasher appoints new global research chief (CPIFinancial)
Elalfy brings over 15 years of professional experience, including 13 years in the investment field and more than two years in the telecoms sector. He has been a CFA charterholder since 2008 and currently is the President of CFA Egypt Society. Prior to joining Mubasher, Elalfy was Director & Co-Head of Research at CI Capital, the wholly-owned investment bank of Commercial International Bank (CIB), Egypt’s largest private-sector commercial bank. Elalfy, who started his career as an Analyst at King Street Capital Management, a New York-based hedge fund manager, holds a BBA (Summa Cum Laude) in Finance & Investments from Baruch College, the City University of New York (CUNY) and an MBA from the American University in Cairo (AUC).

Trading rooms vanish as China brokers go upmarket (Businesstimes)
The Chinese retail investor trading room, a photogenic anachronism frequented by tea-swilling, day-trading retirees who buy and sell stocks between hands of cards, may soon be gone as brokerages cut costs and move upmarket. China’s brokerages are shrinking their retail outlet space to save on rent, and converting rooms once dedicated to sociable mom-and- pop investors into spaces reserved for wealthy individuals and hot-shot hedge fund clients.

Entitlement Run Amok (Absolutereturn-Alpha)
When it comes to cautionary tales of hedge fund riches, few hold a candle to the downfall of Harbinger Capital Management’s Philip Falcone. …Of the managers testifying before Congress in 2008 (Kenneth Griffin, John Paulson, James Simons and George Soros, all of whom had landed on the Rich List in 2007), Falcone was the most enigmatic. Sporting long, curly hair and wire-rimmed glasses, Falcone looked more like a rock star than a hedge fund manager. When he spoke about his hardscrabble upbringing in Minnesota and the scholarship he’d received to Harvard, he seemed to embody the American dream. You really wanted to root for him.

Meeting the Minds of Magnetar (Absolutereturn-Alpha)
In the past few years, few hedge fund firms have generated as much publicity — and controversy — as Magnetar Capital. The firm, founded by Citadel alum Alec Litowitz and Glenwood Capital Investments vet Ross Laser back in 2005, attracted attention at the time of its launch thanks to Lito-witz’s track record at Citadel. But Litowitz and company spent the next several years studiously avoiding the spotlight, focusing instead on growing their business. Then came the financial crisis. Like a handful of other hedge fund firms, Magnetar made a handsome profit in 2007 after the short side of a long-short play on subprime mortgages netted the firm a 76 percent gain in one of its funds. But that same investment, dubbed the Magnetar Trade, brought the firm notoriety when journalists accused the firm of stuffing the deals with lousy assets it knew would fall fast when the market finally crashed.

Cerberus Bet Hits Escape Velocity via GeoEye Merger (Absolutereturn-Alpha)
How different the world can look in a few years! When Stephen Feinberg’s Cerberus Capital Management first took an interest in Herndon, Virginia–based satellite imaging company GeoEye in 2010, the company was poised to fly higher, thanks to multibillion-dollar funding promised by federal agencies, including the U.S. Department of Homeland Security. GeoEye’s stock, which traded at roughly $28.50 at the start of 2010, had spiked to above $40 per share by the start of 2011. That’s perhaps no surprise, given that the company had anticipated splitting $7.5 billion in slated government projects over a 10-year span with its rival DigitalGlobe. The Longmont, Colorado–based satellite imaging specialist pioneered (and continues to provide) some of the technical undergirding of Google’s popular mapping and satellite services used by everyday Internet users and motorists worldwide.

A new roadmap for managing risk (Absolutereturn-Alpha)
The hedge fund industry has evolved significantly over the last ten years. It has been shaped by changes in the marketplace, our investor base, and new regulations promulgated in the U.S., Europe, and Asia. This emerging regulatory framework and the increasing institutionalization of the hedge fund industry have combined to spur many important and positive developments – including changes to transparency and risk management practices. Our industry has never been more focused on risk management.

Valeant Keeps Up a Torrid Deal-Making Pace (NYTimes)
Valeant Pharmaceuticals International has not been afraid to spend its cash. The Canadian health care company paid $2.6 billion on Monday to buy the Medicis Pharmaceutical Corporation, a skin care business based in Arizona. The deal is the latest in a succession of acquisitions by Valeant since it merged with Biovail of Canada in a $3.2 billion deal in 2010.

A fund without the volatility of the Brazilian stock market (HedgeFundIntelligence)
One of the newest alternative UCITS-compliant strategies from the Latin American region is MS Claritas Long Short Market Neutral UCITS Fund. The strategy launched in December 2011 and consists of between 40 to 60 Brazilian stocks. Helder Soares (pictured), chief investment officer and founding partner of São Paulo-based Claritas Investimentos, says the Brazilian stock market, as represented by the Bovespa Index, has been up and down 20% this year. He says: “Year-to-date to July 2012 the fund is up 5% – this means that investors can access Brazil without any of the downside and volatility.

Mitt Romney exited Bain Capital with rare tax benefits in retirement (WashingtonPost)
Before Mitt Romney retired from Bain Capital, the enormously profitable investment firm he founded, he made sure to lock in his gains, both realized and expected, for years to come. He did so, in part, the way millions of other Americans do — with the tax benefits of an individual retirement account. But he was able to turbocharge the impact of those advantages and other tax breaks in his severance package from Bain in a way that few but the country’s super-rich can ever hope to do.

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