The Oracle of Boston (Economist)
HEDGE-FUND bosses rarely double as cult authors. But an out-of-print book by Seth Klarman, the boss of the Baupost Group, sells for as much as $2,499 on Amazon. A scanned version of “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor” has been circulating around trading floors. One hedgie likens Mr Klarman’s book to the movie “Casablanca”: it has become a classic. Why are Wall Street traders such avid readers of Mr Klarman? Baupost, which manages $25 billion, is the ninth-largest hedge fund in the world. Since 2007 its assets have more than tripled, as other funds have wobbled.
Hedge funds fail to wow in first half (Reuters)
Hedge funds have little to brag about halfway through 2012, with some of the industry’s biggest names reporting only small gains and trailing the benchmark U.S. stock index by a wide margin. Paul Tudor Jones’ flagship fund is up 1.59 percent through the third week in June and David Einhorn’s biggest portfolio is up 3.7 percent in the first half, while Daniel Loeb told investors that his largest fund rose 3.9 percent during the first six months of 2012, investors in the funds said.
Hedge fund hit with third stop order (SMH)
THE corporate regulator has reignited a long-running stoush with the world’s biggest hedge fund, Man Investments, by slapping a stop order on one of its investment funds. The Australian Securities and Investments Commission on Wednesday issued an interim stop order against the Man AHL Diversified fund, the third such temporary ban on a Man fund imposed in the past four years.
A hedge fund’s promising stock pick (MarketWatch)
Last month, Abrams Capital Management, a $1.1 billion hedge fund managed by David Abrams, increased its total holdings of Wesco Aircraft Holdings WAIR +0.08% to 4.5 million shares. The fund now owns 5.2% of the company, along with significant holdings of Lamar Advertising LAMR -2.66% , H&R Block HRB -0.25% , and SLM SLM +1.16%. Why has Abrams Capital increased its total ownership of Wesco to 4.5 million shares from 34,800 (as reported on March 31)?
Quants Post Worst Month Since October as Winton Slumps 3.2% (SFGate)
Hedge funds that use quantitative strategies executed by computers suffered their biggest losses last month since October after being whipsawed by Europe’s sovereign debt crisis. The Newedge CTA Index, which tracks some of the largest systematic funds, lost 3.1 percent in June, erasing this year’s gains. David Harding’s $10.2 billion Winton Futures Fund Ltd. slumped 3.2 percent, extending this year’s loss to 4.1 percent, according to a person familiar with the performance. Man Group Plc’s AHL Diversified fund lost 3.4 percent, while the Bluecrest BlueTrend Fund dropped 5.4 percent in June, an investor said.
Linklaters partner takes top legal role at hedge fund Winton Capital (TheLawyer)
Linklaters capital markets partner Brigid Rentoul has left the firm to join Winton Capital Management as legal chief amid a restructuring of the West End hedge fund manager’s in-house team. Rentoul has joined Winton Capital as head of legal, taking responsibility for the company’s business legal affairs, and will work alongside incumbent legal chief Andrew Bastow.
Perry Capital Sued by Solus in Madoff Claims Dispute (BusinessWeek)
Perry Capital LLC was sued by Solus Alternative Asset Management LP over allegations the hedge fund firm made a “willful breach of its obligations” to sell its share of $195 million in claims in Bernard Madoff’s estate. Perry agreed to the trade over the telephone and with “instant messages” that are part of Bloomberg LP’s communications systems for clients, Solus said in a complaint in New York state court in Manhattan. Solus is seeking $20 million in damages.
Italy, Spain To Lose Market Access, Roubini Tells Handelsblatt (Bloomberg)
Italy and Spain will lose access to capital markets in three to six months as European leaders struggle to stamp out the debt crisis, New York University professor Nouriel Roubini was quoted as saying by Handelsblatt. Roubini was asked how much time the euro has left, according to an interview published in the German newspaper today. While last week’s European Union summit bought time for the 17-country euro area, the relief will be short-lived, he was quoted as saying.
New products help Clorox achieve 5% growth (BizJournals)
Clorox shares are approaching the all-time high they reached last summer when activist investor Carl Icahn bid for the Oakland consumer products giant. Icahn’s bid proved to be a washout. But Clorox stock has largely recouped its loss after Icahn’s bid failed — a signal that the bleach maker is firing on all cylinders.
REFILE-Swiss fund managers welcome simpler regulation (Reuters)
Swiss asset managers have welcomed simpler rules for their $4.2 trillion industry, which they say could boost their international reach rather than killing off smaller players as some had initially feared. Regulator FINMA has toned down the proposals it outlined in March, when small managers said its costly one-size-fits-all approach to compliance and risk management might force them to relocate, merge or shut up shop.
Dynegy Inc files for bankruptcy; will merge with unit (Reuters)
Power producer Dynegy Inc (DYN.N), the parent company of Dynegy Holdings, filed for bankruptcy protection on Friday morning as part of its settlement agreement with creditors and said it will merge with its unit. Last month, a bankruptcy court approved the company’s settlement with creditors under which Dynegy and Dynegy Holdings would be combined, with creditors holding a 99 percent equity stake in the combined company.
Nikkei falls after coordinated easing fails to impress (Reuters)
Japan’s Nikkei average fell on Friday as investors were unconvinced that fresh monetary easing by China, the U.K. and Europe will be sufficient to jumpstart slowing global growth. Softbank rose on an upgrade and real estate companies were given a temporary boost by positive brokerage appraisals, but exporters smarted as investors anticipated more bad data will be coming out soon.
Sugar Bulls Strongest In Six Months On Brazil Rain: Commodities (Bloomberg)
Sugar traders are the most bullish in six months after prices moved to within three percentage points of exiting a year-long bear market as rain delayed cane processing in Brazil, the biggest producer. Nine of 11 analysts surveyed by Bloomberg said they expect raw sugar to keep rallying next week and two were bearish, the highest proportion of bulls since Jan. 6. Futures reached an 11- week high of 22.69 cents a pound in New York yesterday. Hedge funds increased wagers on rising prices by 29 percent to the highest since April in the week ended June 26, U.S. Commodity Futures Trading Commission data show.
Europe Recalls Hamilton As Desperation Turns On The Debt (Bloomberg)
As Europe struggles to contain its debt crisis, the name of an American dead for more than two centuries is being invoked by those who think euro area nations will have to trade some autonomy for fiscal stability. Alexander Hamilton, the first U.S. Treasury secretary and the face on the ten-dollar bill, offered cash-strapped states in 1790 a deal they eventually couldn’t refuse: The federal government assumed their debts in return for more centralized power. The alternative risked consigning their creditworthiness to “burst and vanish,” and a breakup, Hamilton warned.
Navistar Falls On Costs For Engines To Meet U.S. Rules (Bloomberg)
Navistar International Corp. (NAV), the maker of International brand trucks, fell the most in three weeks after saying it expects additional costs to introduce an engine that will meet U.S. emission standards after its earlier technology failed to comply. Navistar declined 8.1 percent to $26.44 at 10:23 a.m. in New York, after slipping as much as 9.2 percent to $26.14, the biggest intraday decline since June 12. The shares dropped 24 percent this year through yesterday.
Japan Presses Brokerages in Insider-Trade Probe (WSJ)
Japanese financial regulators are pressing 12 big brokerages to reveal their dealings with an investment adviser recently sanctioned for alleged insider trading, banking minister Tadahiro Matsushita said Friday. Regulators are asking brokers “whether they gave information” to Japan Advisory LLC, Mr. Matsushita said at a press briefing. Japan Advisory provides services to New York-based hedge fund J.H. Whitney Investment Management LLC, according to filings with the U.S. Securities and Exchange Commission. Its license was pulled last week for alleged insider trading ahead of a share offering of Nippon Sheet Glass Co. in 2010.
Frankfurt Roundtable participants find differing attitudes to alternatives from high net worth and institutional investors (Opalesque)
Participants at the Opalesque 2012 Frankfurt Roundtable, sponsored by Eurex which took place at the Deutsche Borse in Frankfurt in June, found differing demands for alternatives from high net worth and institutional investors. Erik Crawford, a consultant for family offices, reported that German high net worth clients have 10-12%, on average, allocation to absolute return, while institutional investors have 2-3% on average. “Demand is weak” he said, “because absolute return strategies have delivered disappointing returns in the past few years. In some cases allocations are being reduced”.
Choppy returns and growing redemptions plague funds (Opalesque)
Hedge funds and fund of funds are under the gun from investors as alpha becomes increasingly difficult to generate in the tumultuous world market. Some of the biggest names in hedge funds like Paul Tudor Jones and Daniel Loeb are up overall for June, and much of the first half of 2012 – but, just barely. According to a Reuters report, Jone’s fund is up just over 1.5% for June, a positive compared to this time last year, but far lower than his historical track record. A similar look at the fund of funds sector from eVestment shows that redemptions are on the rise as investors look for more direct investing opportunities. As a group, hedge funds beat the HFRX Global Index’s 1.22% gain in the first half of 2012. But, those gains seem paltry compared with the 8% gain posted by the S&P 500 broad market index. Funds have cited the continuing Eurozone crisis as one of the key factors influencing overall underperformance of the industry, although that argument carries a certain weakness compared against broad market equity performance over the same period.
Boss at Alliance Trust, one of Britain’s biggest funds, stages clearout of fund managers (DailyMail)
Katherine Garrett-Cox, the under fire boss of Alliance Trust, announced a clearout of fund managers and the closure of three funds in a bid to turn around its performance. But yesterday’s move is unlikely to appease critics who have been calling for her head after several years of disappointing returns. As part of its bid to create a ‘more focused and efficient investment’ process, the Dundee-based trust has shut three funds owned by its subsidiary Alliance Trust Investments.
SEC Names Norm Champ as Director of Division of Investment Management (SEC)
The Securities and Exchange Commission today announced that Norm Champ has been named Director of the agency’s Division of Investment Management. Mr. Champ has been serving as Deputy Director of the SEC’s Office of Compliance Inspections and Examinations (OCIE). He assumes his new duties on July 9 and succeeds Eileen Rominger, who is retiring.
German allocators question the truth behind the tag of ‘absolute return’ funds (InvestmentEurope)
German investors have added their names to allocators expressing disappointment with ‘absolute return’ products, and cutting their allocations, at the very same time the urgency to make money regardless of market conditions increases. Investors say they want absolute returns, but that this is not what funds using that tag have delivered to them.
J. Alexander’s shareholder seeks annual meeting (Reuters)
U.S. restaurant chain operator J. Alexander’s Corp second-largest shareholder, Privet Fund LP, filed a complaint with the Tennessee Chancery court asking the company to hold its annual meeting of shareholders. Hedge fund management firm Privet last month expressed its dissatisfaction over Fidelity National Financial Inc’s offer to buy J. Alexander’s for $12 per share in cash and stock, saying it undervalued the company.
18 Months After Launch, the Canadian LP Structure Managed by Innocap Investment Management Inc. Reaches $235 Million (MarketWatch)
The Canadian LP structure managed by Innocap Investment Management Inc. (“Innocap”), launched 18 months ago in response to increasing demand for hedge funds from investors in Quebec and Canada, has reached $235 million in assets under management as of May 31, 2012. The structure now houses four specialized Quebec-based managers with strong portfolio management skills and knowledge of local and international markets. The fund offering is expected to increase to seven funds by the end of the year. The offering addresses investors’ appetite for hedge funds while providing visibility for Quebec and Canadian managers. The Innocap platform provides a risk and asset-controlled environment for investing in hedge funds.
Roman right to lead the way for tighter regulation of US hedge funds, say Helvetic (ITNewsOnline)
Manny Roman, a leading figure within the hedge fund industry recently highlighted the need for tighter regulation of the hedge fund industry within the US, in order to avoid future scandals. Nicola Smith, CEO of fund administrator, Helvetic commented: “In 2008 the collapse of the financial sector and the discovery of the Madoff scandal triggered a worldwide sell-off of risk assets which brought financial markets to the brink of a meltdown. The blame was quickly placed at the foot of the financial markets, most notably hedge funds who took advantage of light regulations allowing them to engage in highly speculative transactions through opaque structures.
JAT Capital, Down 20%, Is a Lesson in Volatility (NYTimes)
A year ago, John A. Thaler was the talk of Wall Street. His hedge fund was up more than 30 percent, defying a broad slump in the market and the debt turmoil in Europe. Investors, starved for returns, scrambled to hand him their money. This year, things appear to have cooled off for Mr. Thaler. Rapidly. His JAT Capital is down nearly 20 percent so far, according to internal documents from the fund, as big concentrated bets on consumer stocks have plunged. Investments in the mattress maker Tempur-Pedic, which has fallen 70 percent since April, have punctuated the fall.
NBA Player Pays Homage to Hedge Fund (HedgeFund)
A newly-minted NBA player credits his internship at hedge fund firm Morgan Creek Capital Management for his work ethic. Tyler Zeller, who was drafted in the 2012 NBA draft as a first-round pick, told ESPN that the internship taught him “time management.”
Credit Suisse Liquid Alternative Beta (“LAB”) Index Up 1.40% in June (MarketWatch)
The Credit Suisse LAB Index was up 1.40% in June according to Dr. Jordan Drachman, Head of Research for Alternative Beta Strategies at Credit Suisse. Dr. Drachman noted, “The Credit Suisse Liquid Alternative Beta Index (“CSLAB”), which aims to reflect the performance of the overall hedge fund industry, finished up 1.40% in June. The Event Driven strategy was the most significant contributor to performance, finishing up 4.75% for the month, bringing performance to 4.71% year-to-date.”
Direct Investment in Hedge Funds Poses Challenges (ai-CIO)
Fund of funds may not offer the cheapest way to invest in hedge funds, but direct investments bring their share of headaches as well. Institutional investors looking to directly invest in hedge funds must fully understand the four principal hedge fund strategies—and appreciate how they differ in their effect on portfolio diversification—if they are to do the job correctly, a paper by consultancy bfinance asserts.
AIP-Kingsmont Awarded New Fund Mandate (SacBee)
Alternative Investment Partners Inc., AIP-Kingsmont Fund I GP, LLC and Kingsmont Investment Management Inc. (together, “AIP-Kingsmont”) has been awarded a new mandate and became the new General Partner and Portfolio Manager for a hedge fund (the “Fund”). The Fund was previously managed by Pearl and McKinney L.P. and its principal Charles Tate, a well known portfolio manager and founder of Hicks, Muse, Tate & Furst which was involved in more than 400 transactions with a total capital value of approximately $50 billion.
How a hedge fund bust ‘may’ relate to Kleiner Perkins suit (Fortune)
“Do you know who her husband is?” I’ve been asked that question a lot over the past seven weeks, while covering Ellen Pao’s gender discrimination lawsuit against venture capital firm Kleiner Perkins Caufield & Byers. It almost always came from those sympathetic to Kleiner Perkins, as a sleazy insinuation that Pao’s marriage certificate invalidated her accusations.
Piece of Cake! Hedge Fund Manager Falcone Plans Fraud Defense That Casts Blame on Help (Observer)
Let’s say you’re a hedge fund manager, and the Securities and Exchange Commission comes calling with allegations that you fraudulently withdrew $113.2 million in client funds to pay your personal taxes; that worse, you ignored an adviser’s suggestion that you borrow against your St. Bart’s estate or National Hockey League franchise to keep the tax man at bay; went opinion-shopping for a law firm that would okay the loan from client assets; and appropriated the cash from a fund from which your investors were prohibited from redeeming assets. That type of situation might be cause for concern, though frankly, if you were the kind of smooth operator who dreamed up the idea of loaning yourself $113.2 million in the first place, you probably wouldn’t be a worrying type.