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Hedge Fund News: George Soros, William Ackman, Carl Icahn

SOROS FUND MANAGEMENTHedge fund manager to pay $405M to Madoff victims (WSJ)

A settlement announced Sunday will bring $405 million to victims of Bernard Madoff’s historic investment scam, the state attorney general said. The clients of hedge fund manager J. Ezra Merkin will receive $405 million, and New York state will get $5 million to cover the cost of the settlement worked out by Attorney General Eric Schneiderman. The victims include New York Law School, Bard College, Harlem Children’s Zone, Homes for the Homeless and the Metropolitan Council on Jewish Poverty.

Custom House Global Fund Services secures ISAE and SSAE accreditation (HedgeWeek)
Hedge fund administrator Custom House Global Fund Services has achieved dual accreditation under both the new US auditing standard, SSAE16 (the replacement for SAS 70), and its international equivalent, ISAE3402 (collectively the ‘New Standards’). The new accreditation covers the controls for all fund administration and shareholder services’ work carried out in the Chicago, Dublin, Luxembourg, Malta and Singapore offices, as well as the controls in place in the related IT platform.

Rising as Japan Declines (Barrons)
Toru Hashizume is one of those lucky guys whose skills perfectly suit their environment. The 43-year-old hedge-fund manager thrives in a crisis, and his native Japan has provided ample opportunity for him to shine in the past 20 years. Fresh out of college in 1991 Hashizume got a job as an equity analyst at a big brokerage firm just as the country fell into its two “lost decades” of deflation and financial turmoil. His employer, Yamaichi Securities, went bankrupt seven years later, but Hashizume landed on his feet as a portfolio manager of the Mitsubishi UFJ Active Open mutual fund (ticker: 03311025.Japan). He developed a value-based strategy that mostly focused on cheap stocks, many of them in low-cost technology services that could grow regardless of Japan’s travails. The fund gained 6.69% a year on average from June 1998 to May 2006 while the Tokyo Stock Price Index (TOPIX), the broadest measure of Japan’s equity market, was losing 4.17% annually.

Hedge Fund Survey: Institutional Investors Looking to Alternatives (Hedgeco)
Institutional investors across the globe are demonstrating significant demand for alternatives to support investment objectives such as diversification and alpha generation, and these expanding allocations are spurring greater interest in customized, investor-driven implementation approaches, according to the 2012 Global Survey on Alternative Investing released by Russell Investments. “Since 1992, the Russell Global Survey on Alternative Investing has provided an important view into the changing nature of institutional perspectives regarding alternative investments,” said Julia Cormier, director, alternative investments.

New Dow Jones Credit Suisse Hedge Fund Index Commentary Offers Insight into May Hedge Fund Performance (MarketWatch)
The Dow Jones Credit Suisse Hedge Fund Index finished down 1.33% in May. A new monthly commentary offers insight into hedge fund performance through the month of May. Some key findings from the report include: Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished May down 1.33%, with 4 out of 10 strategies in positive territory; In total, the industry saw estimated outflows of approximately $2.39 billion in May, bringing overall assets under management for the industry to approximately $1.73 trillion;

Ex-King Street Head Trader Goodwin Said to Plan Hedge Fund (SFGate)
Kieran Goodwin, the former head trader at $18.5 billion fund King Street Capital Management LP, plans to start a credit hedge fund in the fourth quarter, according to a person familiar with the matter. Panning Capital Management LP, Goodwin’s New York-based firm, will begin trading in mid-October with bets on and against securities from loans to distressed assets, said the person, who asked not to be named because the information is private. Goodwin declined to comment.

Hedge fund exit requests lower than year ago – GlobeOp (Reuters)
Client demands to pull money out of hedge funds remained relatively subdued in June, data shows, in a sign that investors are still backing these freewheeling portfolios to guide them through the financial crisis. The GlobeOp Forward Redemption Indicator, a monthly snapshot of clients giving notice to withdraw their cash as a percentage of GlobeOp’s assets under administration, measured 3.71 percent in June.

OMG Shoes: Hedge Fund Bigwig Suing Ex-Wife For Portion Of $1 Million Shoe Collection (Gothamist)
Ladies, ladies, we know New Yorkers love their Loubotin’s, but even this seems a little excessive: hedge-fund CEO Daniel Shak is suing ex-wife and World Series of Poker Player Beth Shak for reportedly hiding her $1 million shoe collection from him during their divorce proceedings and settlement three years ago. Beth Shak—who describes herself on Twitter as a “shoe addict” and “shoe connoisseur,” runs a website called shoesrforever, was featured in a Huffington Post video last year entitled “Beth Shak Owns 1,200 Pairs of Shoes” and apparently has a Christian Louboutin stiletto tattooed somewhere on her nether regions—says there’s no way Daniel Shak didn’t know about her collection. “He is saying he didn’t know the closet in our master bedroom existed,” she told the Post.

Hedge Fund Veteran Bill Ackman Reports $664 Million Stake in Burger King Worldwide – cbl (CityBizList)
William Ackman, along with his Pershing Square Capital Management LP, have reported a 12 percent stake worth $664.43 million in Burger King Worldwide Inc. (NYSE: BKW), according to an SEC filing. The New York-based hedge fund sponsor said Ackman owned 41.92 million shares in the Miami-based fast food chain, which turned public last week. Of the shares, Pershing Square co-owned 38.36 million, or 11 percent. Ackman’s stake’s value is based on the stock’s closing price of $15.85 per share on June 22.

Hedge funds get exotic in hunt for profits (Reuters)
Investors fed up with losses from their mainstream hedge fund holdings are eyeing some exotic alternatives. How exotic? How about portfolios betting on Chinese companies embroiled in fraud probes? Or funds looking to arbitrage prices in the electricity market?

Germany must step up to save eurozone, George Soros says (Guardian)
George Soros has criticised Germany’s “can’t do” attitude and said it will be to blame if it blocks plans to rescue the single currency. Writing in the Financial Times, the billionaire hedge fund manager suggested the eurozone should set up a fund to buy and hold debt from crisis-hit countries in return for them undertaking reforms.

Kepos’ quiet touch wins favor among quant funds (Reuters)
When Mark Carhart meets with the world’s largest pension funds and endowments he brings along an appealing proposition: His new hedge fund makes money during a crisis. To be exact, Kepos Capital’s computer driven trading models have earned returns of more than 5 percent this year as Europe’s worsening debt crisis washed away gains elsewhere, leaving investors increasingly uneasy over where to put their money.

Are Hedge Funds The Root Of All Evil ? (HereIsTheCity)
I was having a perfectly nice drink with an ex-colleague of mine recently, when he suddenly put forth the controversial proposition that hedge funds were, and I quote, ‘the root of all evil.’ I asked him to elaborate, and summarize his main points below: Hedge fund managers receive 20% of the fund profits when all goes well, but tend to lose their investors (and hence their jobs) if they underperform. The rewards for winning can therefore be huge, but failure brings with it vicious and rapid punishment. Such massive carrots and sticks, he said, may well incentivize hard work, but they can also result in a willingness to break the rules.

Hedge Fund Investors Search for Something More Interesting (HedgeFund)
What is it like to be a hedge fund taking on unique investments like the reinsurance industry or electricity arbitrage? It means seeing growing demand from investors, according to a Reuters article.

What Strategies Worked in 2012’s First Half (Barrons)
After thundering out of the gate in 2012, hedge funds have given up most of their gains through May, rising just 1.26%, on average, according to the industry data tracker HFR. As we hit the halfway point of 2012 this week, these returns are expected to slide toward zero. Which hedge-fund strategies are working and which aren’t? Fixed-income-related plays continue to set the pace, led by asset-backed securities, which are up an average of 6.2% (Barron’s highlighted this trend in “Best 100 Hedge Funds,” May 21). On the equity side, health-care and biotechnology funds have enjoyed plump returns, up 6.3% …

Waltham Forest confirms first hedge fund search (HFMWeek)
The £500m ($826.7m) pension fund for the London Borough of Waltham Forest has signed off a 5% allocation to hedge funds, marking its first foray into the space, HFMWeek can confirm. A panel of pension fund committee members have been delegated responsibility for the £50m ($78m) search, according to March meeting minutes, as part of a new investment strategy approved in February last year.

Greenwich Global Hedge Fund Index fell 1.86% in May (+1.9% YTD) (Opalesque)
Hedge fund managers ended the month lower in May 2012 as the Greenwich Global Hedge Fund Index fell 1.86% for the month. Futures strategies were the best performers during the month, returning their biggest monthly gain this year of 2.31% on average. The GGHFI’s loss (-1.86%) compared favorably to global equity returns with the S&P 500 Total Return (-6.01%) and MSCI World Equity (-8.99%) equity indices. 31% of constituent funds in the GGHFI ended the month with gains. “The financial crisis in Europe emerged with renewed focus in May, with concerns about both Greece and Spain placing significant pressure on financial markets. Signs of slowing growth in the US and Asia also contributed to negative action in world equity markets. Long-Short Equity funds lagged other hedge fund strategies in this environment with a loss of 4.24%, but outperformed global equity returns.

BlackRock tightens securities lending standards (FT)
BlackRock has announced tighter limits on securities lending by its iShares exchange traded funds business along with new plans to compensate investors if a securities lending transaction goes wrong. Securities lending – where shares or other assets held in a portfolio are lent, typically to a hedge fund or other short-seller, in return for a fee – is common practice across the fund management industry. Managers say it improves returns and reduces costs for investors.

New York Times: Sheldon Adelson Is Evil — But George Soros Isn’t (FrontPagemag)
The Sunday New York Times had an op-ed vilifying casino magnate Sheldon Adelson yet again. Stating that he is pouring money into a political agenda that is “wildly at odds” with the American nation’s needs, the NYT wrote about Adelson in a way it has never written of George Soros or labor unions who have given more to the liberal left. The op-ed stated that Adelson was “the perfect illustration of the squalid state of political money, spending sums greater than any political donation in history to advance his personal, ideological and financial agenda, which is wildly at odds with the nation’s needs.”

Billionaire George Soros Bets On Brazil’s Wireless Boom (Bloomberg)
George Soros, the billionaire investor and philanthropist, continues to bet on Brazil. Quattro Telecomunicacoes, a Brazilian holding company that Soros acquired earlier this year, is angling to buy more 4G wireless airwaves in the country’s next government auction. The spectrum would be used to deliver high-speed Internet service to mobile devices in Latin America’s biggest economy.

Jim Rogers: Bailouts Led to WWII; He Should Brush Up on his History (ValueWalk)
Jim Rogers during an interview with Yahoo news stated that the current European debt crisis could lead to another world war. Rogers thinks that the current bailouts lead to world war II and could trigger world war III. Here are some direct quotes from the interview: “This is how we got into World War II.” “Add debt, the situation gets worse, and eventually it just collapses. Then everybody is looking for scapegoats. Politicians blame foreigners, and we’re in World War II or World War whatever.”

Carl Icahn loans Motricity $20M; company mulls spin-offs (BizJournals)
The future of Motricity seems uncertain, in the wake of an emergency loan from billionaire investor and Motricty shareholder Carl Icahn and moves to possibly sell off parts of the company. The Bellevue-based mobile marketing company has borrowed $20 million from High River Limited Partnership, a venture capital firm owned by Icahn, according to a regulatory filing Thursday. Icahn owns about 15 percent of Motricity’s stock and is the company’s largest single shareholder.

Icahn Says Goldman Doesn’t Deserve Payment on CVR Energy Bill (WSJ)
Carl Icahn says he isn’t paying a bill from Goldman Sachs Group Inc., on principle. The investment bank on Thursday sued a company controlled by the veteran activist investor over an $18.5 million bill, saying CVR Energy Inc. owed Goldman for work done earlier this year.

Bulls Proven Wrong As Prices Slump Into Bear Market: Comm (Bloomberg)
Speculators increased bets on a rally in commodities for a second consecutive week, just as prices tumbled into a bear market after the Federal Reserve refrained from expanding monetary stimulus. Hedge funds and other money managers raised net-long positions across 18 U.S. futures and options by 7 percent to 628,560 contracts in the week ended June 19, Commodity Futures Trading Commission data show. That’s the highest in four weeks and the first consecutive gain since the end of February.

Esprit CEO Pledges Smooth Handover With Turnaround On Target (Bloomberg)
Esprit Holdings Ltd. (330) Chief Executive Officer Ronald Van der Vis pledged to stay in the post for as long as a year after resigning this month and said the apparel maker is meeting turnaround projections. The 44-year-old Dutchman is open to remaining on the board in the future and will “ensure a smooth transition,” he said in an interview in Amsterdam. Esprit isn’t in acquisition talks and has no accounting problems, he assured. Van der Vis also said he had “no idea” Koerber would quit soon after his own resignation was made public.

Brevan Howard Seeks $20 Million Investments For Debt Fund (Bloomberg)
Brevan Howard Asset Management LLP, Europe’s second-biggest hedge-fund manager, is seeking capital for a new pool that buys securities tied to mortgages and other debt. The Brevan Howard Credit Value Master Fund invests in mortgage-backed securities, collateralized debt obligations linked to real-estate and illiquid securities trading below their “intrinsic value,” the London-based firm wrote in a marketing document obtained by Bloomberg News.

New E-mails May Reveal That The Relationship Between Raj Rajaratnam And Goldman Was Closer Than Anyone Ever Imagined (BusinessInsider)
Evidence that came to light during the Rajat Gupta trial may spell trouble for other Goldman Sachs employees that did business with convicted insider trader, Raj Rajaratnam. New wiretaps and e-mails indicate that Goldman sent the convicted former hedge funder frequent e-mails full of juicy information before Galleon’s morning meetings, Reed Albergotti at The Wall Street Journal reports.

Hedge fund launches at highest since last quarter of 2007 – news of week 25 (Opalesque)
In the week-ending 22 June 2012, Hedge Fund Research revealed that hedge fund launches totaled 304 in the first quarter, narrowly eclipsing the 298 launches in 1Q11 for the highest quarterly total since 4Q07; Citigroup’s former head of proprietary trading Sutesh Sharma said he would launch the $500m Portman Square Capital this autumn; former Winton Capital duo Bruce MacDonald and Dr. Patrick McSharry announced the launch of Rudolf Wolff Global Portfolio (long/short) hedge fund; JPMorgan Chase & Co.’s Deepak Gulati held talks with investors for a possible hedge fund launch; Swiss bank UBS and HFR launched four UCITS-compliant hedge fund ETFs; William Michaelcheck’s $4.7bn Mariner Investment Group is starting a pool to invest in new hedge funds; Tony D’Andraia and Justin Meadlin teamed up to launch their maiden hedge fund, the Hyaline Capital Opportunity Fund; and Brevan Howard is seeking capital for a new pool that buys securities tied to mortgages and other debt.

Japan’s regulatory system makes it more attractive for investors – Opalesque Japan Roundtable (Opalesque)
Japan has a rule of law that makes it more attractive for investors to allocate money into the country, said David Baran, Founder and Co-CEO of Symphony Financial Partners in the latest Opalesque Japan Roundtable held in Tokyo last month. The roundtable was sponsored by law firm Bingham McCutchen and Eurex and took place at Bingham’s Tokyo office. Baran said, “Japan has a great rule of law. If you have an issue with a company or counterparty, you can sue them. Symphony has done it; we fought back the first poison pill in this country. We took our case to the local court, the secondary court, and then the Supreme Court, and won all three times.

Short term CTAs see improving climate ahead (Opalesque)
Short-term CTAs are finding themselves well positioned for returns given current market conditions. A recent report from Citi Prime Finance shows that record allocations are flowing into CTA and macro strategies as investors seek returns that aren’t solely tied to volatile equity markets. This is welcome news for short-term CTAs that have had a hard time finding returns in the last few quarters. CTA assets under management rose 52% between the end of 2007 and 2011, according to Barclayhedge. The turning point for CTAs came in 2008, the Citi report says, when they outperformed other hedge fund strategies and long-only managers. This led many institutional investors to look at ways to diversify their portfolios to weather periods of market volatility.

Goldman loses bid to dismiss suit over CDO deals (MarketWatch)
Goldman Sachs Group Inc. GS -0.29% lost a bid to dismiss a shareholder lawsuit alleging it made material misstatements in its own securities filings about its conflicts of interest in several complex securities transactions, including the now-infamous Abacus 2007 deal. In a 27-page opinion, Hon. Paul A. Crotty of the U.S. District Court in the Southern District of New York said the shareholders, led by the Arkansas Teacher Retirement System and other pensions, sufficiently argued that Goldman made material misstatements about its business practices and conflicts in its roles in collateralized debt obligations like Abacus, and similar deals named Hudson, Anderson and Timberwolf.

Bermuda Fund Amendment Act Attracts Japanese Investment (Hedgeco)
Bermuda has introduced regulatory rules aimed at facilitating and attracting investment by Japanese retail investors into Bermuda domiciled hedge funds, which are expected to result in significant growth and development in Bermuda’s investment funds industry. The rules are likely to increase confidence from the Japanese Securities Dealers Association and the Japanese market generally in Bermuda’s highly effective and nimble regulatory system for investment funds.

New: Morningstars Analyst Rating and Global Fund Reports for Alternative Mutual Funds (Hedgeco)
Hedge fund tracker Morningstar has introduced the Morningstar Analyst Rating™ and Global Fund Reports for approximately 40 alternative U.S. mutual funds, representing about 75% of the alternative fund universe by assets. Over the next year, the company plans to increase its alternatives coverage to approximately 100 funds. Initially, Morningstar analysts assigned a Morningstar Analyst Rating of Gold to one alternative mutual fund, a Silver rating to nine funds, a Bronze rating to seven funds, a Neutral rating to 17 funds, and a Negative rating to six funds.

Citadel pro joins Hankar Capital as CRO (HFMWeek)
HanKar Capital, a New York-based asset manager that invests in relative value and arbitrage strategies within the global equity and hybrid equity universe, has hired Don Lee, formerly of Citadel Investment Group, as chief risk officer, HFMWeek has learned. Prior to the move, which is effective immediately, Lee spent five years at Citadel from 2006 through 2011 as a managing director.

Switzerland joins EU Fatca talks under new model (HFMWeek)
Switzerland has become the latest country to enter into talks with the US Treasury on the US anti-tax evasion regulation the Foreign Account Tax Compliance Act (Fatca), joining several other European countries in developing international frameworks for intergovernmental cooperation, it was announced on Thursday. Heavily criticised for being too US-centric and for violating many countries’ data protection laws, Fatca will require all investment vehicles with US investors to report to the country’s authorities.

Africa-Focused Scipion Seeking US Investors (HedgeFund)
Trade finance is somewhat overlooked in the current go-go financial landscape. Essentially, it’s about providing loans directly to companies and financial institutions trading in soft commodities and minerals, and then getting returns through reimbursement of the loan upon the completion of individual transactions.

‘Sugar daddy’ Tory donor’s company earns £125million a year….but pays just £77,000 tax (DailyMail)
A millionaire Conservative Party donor’s company paid only £77,000 in corporation tax in Britain despite annual ­earnings of £125million, it was reported today. Michael Hintze, nicknamed a ‘Sugar Daddy’ to Prime Minister David Cameron, runs a hedge fund empire handling investments around the world worth £5.5 billion.

When scientists become hedge fund managers (FT)
There are many gems in the annual report of the Bank of International Settlements that came out on Sunday. One of the most intriguing is a trail which leads to an actual estimate of the cost to society of scientists becoming hedge fund managers. The trail starts at a section about debt sustainability across a number of countries. It notes that elevated levels of debt got us into this crisis and the situation still hasn’t improved for many countries. In fact, for some countries, the debt burden of the private sector has gotten even worse.

ISAC to cut hedge-fund and private-equity investments (ChicagoBusiness)
The Illinois Student Assistance Commission will vote today on a plan to slice the exposure of the $1 billion fund backing the state’s prepaid-tuition college savings plan to hedge funds, private-equity funds and other alternatives to stocks and bonds. At the same time, the state agency, which last year halted sales of new contracts for the College Illinois program,…

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