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Hedge Fund News: Scott Rothstein, Warren Buffett, Barton Biggs

J&J, Amazon on list that hedge funds love to hate (Reuters)
Hedge funds turned their backs on Johnson & Johnson and Inc in the last months, kicking the former market darlings into a group where they see stock prices dropping, research from Goldman Sachs shows. Healthcare company Johnson & Johnson, whose share price slipped 3.14 percent through mid-May from January 1, now heads Goldman’s newly created list of “50 Very Important Short Positions.” Exxon Mobil Corp., Intel Corp, International Business Machines and round out the top five companies that represent the largest short positions in the $2 trillion hedge fund industry.

hedge funds vs. mutual funds

New Dow Jones Credit Suisse Hedge Fund Index Commentary Offers Insight into April Hedge Fund Performance (Marketwatch)
The Dow Jones Credit Suisse Hedge Fund Index finished down 0.04% in April. A new monthly commentary offers insight into hedge fund performance through the month of April. Some key findings from the report include: Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished April down 0.04%, with 4 out of 10 strategies in positive territory. In total, the industry saw estimated outflows of approximately $8.35 billion in April, bringing overall assets under management for the industry to approximately $1.75 trillion.

Hedge Funds Expect to Benefit from JOBS Act (
President Barack Obama’s signing of the JOBS Act may have given the hedge fund industry a boost for the future – if that’s possible for a $2 trillion global business. That’s because embedded in the legislation are provisions lifting the rule – dating back to the 1930’s – that bans hedge funds from soliciting or advertising to the general public. The Securities and Exchange Commission has 90 days from the signing of the act, or until July 5 to adopt final rules revising the solicitation rule.

SEC Sues Hedge Fund Execs for Ponzi Scam (
The founder and the chief operating officer of a Florida hedge fund have been named in a Securities and Exchange Commission lawsuit for their roles in a massive Ponzi scheme. The SEC announced Tuesday that Fort Lauderdale-area residents George Levin and Frank Preve allegedly raised more than $157 million from 173 investors during a two-year period from 2007 to 2009, and then used those funds to purchase discounted legal settlements that didn’t actually exist from former attorney Scott Rothstein. Rothstein is serving 50 years in prison for carrying out a $1.2 billion Ponzi scheme – with the fictitious settlements – that is considered one of the largest in South Florida history.

Jailed hedge-fund manager Rajaratnam’s VIP list included ex-Goldman Sachs director Gupta’s name (Newstrackindia)
A former assistant of jailed hedge-fund manager Raj Rajaratnam has said in his testimony against ex-Goldman Sachs Director Rajat Gupta, that Rajaratnam had kept a VIP list of people, which included the name of the Indian American businessman, who has been put to trial by a Manhattan court. The assistant, Carlyn Eisenberg, told a Manhattan federal court jury that Gupta, was among the few names on the list. Gupta, 63, has been accused of insider-trading charges that helped Rajaratnam, who was his friend.

$35 Million Verdict in Delaware Hedge Fund Accounting Fraud Case (HedgeCo)
The Delaware Court of Chancery has awarded plaintiffs Peter McConnon and Timothy Lyons of hedge fund Paron Capital Management LLC., more than $35 million in damages. James Crombie, a former member of the hedge fund, was found to have forged his track record and fraudulently used third party accountants to verify his work. The Court held that Crombie’s fraud had derailed McConnon’s and Lyons’s “highly successful” careers in the financial services industry and that “plaintiffs are entitled to extensive damages against Crombie based on their lost future earnings and other costs associated with the formation and operation of Paron.”

Hedge Fund Philanthropy: 10th Annual Chicago Open Your Heart to the Children Benefit (HedgeCo)
Hedge Funds Care is today holding a silent auction at it’s 2012 Midwest Gala. Prizes include a seven days/Six night vacation for two in the fabulous Oyster Bay Beach Resort in St. Maarten, 4 VIP Tickets to Opening Bell at the NYSE, among others. Hedge Funds Care is an international charity, supported largely by the hedge fund industry, whose sole mission is preventing and treating child abuse.

Sealy Directors Under Hedge-Fund Criticism Lose Votes (Businessweek)
After poring over $1.2 trillion in gross hedge-fund assets across 700 firms, Goldman Sachs’ (GS) analysts have come up with a hedge fund “Very Important Short Position” list. This “VISP” list pairs with the “Very Important Position (HVIP)” list they say has risen 7.3% to May 15 versus 6.7% for the S&P 500. Take a moment to make fun of the firm’s Very Important All Capitals List-Making Proclivity, Since This Stuff Really Is A Big Deal, You Know, After All. In acronyms, that’s VIACLMPSTSRIABDYKAA to you.

Goldman Sachs’s Trott Tells Jury Of Buffett Deal Secrecy (Bloomberg)
Warren Buffett’s investment in Goldman Sachs Group Inc. (GS) in September 2008 was so confidential that even his chief financial officer was unaware of it before being briefed on the details by a Goldman Sachs executive, a witness at the Rajat Gupta trial testified. Byron Trott, who was vice chairman of investment banking at Goldman Sachs and the architect of the $5 billion investment by Buffett’s Berkshire Hathaway Inc. (BRK/B), testified today at Gupta’s insider-trading trial. Prosecutors, who called Trott as a witness, claim that Gupta, then a Goldman Sachs director, tipped Galleon Group LLC co-founder Raj Rajaratnam before the Buffett deal became public on Sept. 23, 2008.

Sino-Forest Engaged In ‘Fraudulant Scheme,’ OSC Alleges (Bloomberg)
Sino-Forest Corp. cofounder Allen Chan helped run a “complex fraudulent scheme” that exaggerated the timber producer’s assets, secretly benefited from a 2010 acquisition and misled investigators, Canada’s main financial regulator said. The Ontario Securities Commission detailed the charges in a statement yesterday, almost nine months after the Toronto-based watchdog said it was probing the company and some of its employees. Chan and four former senior Sino-Forest executives — Alfred C.T. Hung, George Ho, Simon Yeung and Albert Ip — inflated the company’s revenue and made misleading public statements, it said.

4 Stocks Hedge Funds Are Selling: Should You? (Seekingalpha)
Hedge funds tend to have the inside track on what is happening in the stock markets. It isn’t because of insider information – at least not usually. It’s just what happens when you have millions (if not billions) of assets under management and enough clout to get the CEOs of major companies to talk to you. Hedge funds also have massive resources, often employing dozens, if not hundreds, of people to watch and interpret market movements. In other words, hedge funds have an edge when it comes to investing so when they start selling stock in a specific company investors would do well to give their investments a closer look. Looking at the stocks hedge funds held at the end of the first quarter 2012 compared to the end of last year, there were a handful of companies that hedge funds abandoned in droves during the first quarter.

Millbrook Capital To Close Hedge Fund, Focus On Founder’s Fortune (Finalternatives)
Another hedge fund manager is getting out of the hedge fund business. Millbrook Capital Management is closing its only hedge fund and returning to its roots, as a family office for John Dyson, the former New York State commerce commissioner and private equity veteran. MMI Investments will return all outside capital by the end of next month. In addition, the 15-year-old small-cap activist hedge fund’s portfolio manager, Clay Lifflander, is expected to leave the firm, Hedge Fund Alert reports. Research vice president Craig Rosenblum and assistant portfolio manager Jerome Lande have already left the New York-based firm to start their own activist hedge fund, Coppersmith Capital. But CFO Alan Rivera and analyst John Powers plan to remain with Millbrook.

Barton Biggs is ‘Evolving’ (Huffingtonpost)
President Obama made big news recently when he declared his support for gay marriage. He indicated his position on this issue had “evolved”. The President has nothing on Barton Biggs. Mr. Biggs has been “big” in the world of securities prognosticators for many years. He was the formerly the head strategist at Morgan Stanley where he was reportedly responsible for the formation of its investment management business. He is the author of Hedgehogging, an insider’s look at the hedge fund industry and the founder of Traxis Partners, a hedge fund. Here’s what Smart Money had to say about his expertise: “As the global investment strategist for Morgan Stanley, Barton Biggs is without question the premier prognosticator on the international scene and a mover of markets from Argentina to Hong Kong. It wouldn’t be a stretch to say Biggs wrote the book on emerging-market investing.”

Paulson-Led Group Plans to Sell Hotels to End Their Bankruptcy (Sfgate)
A group led by Paulson & Co. plans to sell the Arizona Biltmore resort and the Claremont Hotel Club & Spa in Berkeley, California, as part of an effort to bring the properties and two other hotels out of bankruptcy. Paulson, a New York-based hedge fund, and co-investor Winthrop Realty Trust are marketing the Arizona Biltmore in Phoenix with a opening price of $425 million, and the 279-room Claremont Hotel starting at $80 million, according to two people familiar with the plans, who asked not to be identified because the marketing details are private.

Sprott Inc. sees 60% jump in first-quarter profits (Theglobeandmail)
Stock markets have been propped up by central banks, and will remain “vulnerable to a downturn in the second half of the year” without further government stimulus, warns the chief executive officer of Sprott Inc. “We don’t believe that the U.S. recovery is supported by strong fundamentals, and the rally may already be fading in the fact of worsening economic data and the deteriorating situation in Europe,” Peter Grosskopf told analysts in a conference call on Wednesday.

1-Ex-Millennium Collison shuts Asia hedge fund (Reuters)
Singapore-based Orvent Asset Management has shut its $130 million event-driven hedge fund after its Swedish seed capital investor pulled out at the end of April, two sources with direct knowledge of the matter said. Stockholm-based Brummer & Partners, one of Europe’s largest hedge funds, with about $14 billion under management, backed Scott Collison, a former portfolio manager at Millennium Management in Singapore, in starting the fund early in 2011.

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