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Hedge Fund News: Steven Cohen, Daniel Arbess, Fortress Investment Group LLC (FIG)

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Editor’s Note: Related tickers: Fortress Investment Group LLC (NYSE:FIG), HSBC Holdings plc (NYSE:HBC), Credit Suisse Group AG (NYSE:CS), Wells Fargo & Company (NYSE:WFC), Capital One Financial Corp. (NYSE:COF), The Blackstone Group L.P. (NYSE:BX), Morgan Stanley (NYSE:MS), Transocean LTD (NYSE:RIG), Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB)

SAC fund to adopt claw-back provisions, beef up compliance (FoxBusiness)
Steven CohenHedge fund titan Steven A. Cohen told investors on Thursday that his $15 billion fund will claw back earnings of any employees whose conduct leads to regulatory or criminal sanctions, according to a letter being sent to investors. The fund has been at the center of the U.S. government’s probe into insider trading, and Cohen said he is taking this and other steps now to deter “unacceptable and unwanted conduct.” Reuters obtained a copy of the letter. The new provision will take effect January 1, 2014. SAC is also boosting compliance staff and will prohibit employees from having contact with anyone but senior management or investor relations staff at public companies.

Vanity Fair Made Steve Cohen Look Like Moby Dick In This Great Graphic (BusinessInsider)
Vanity Fair has gone “Moby Dick” on billionaire hedge fund manager Steve Cohen, the founder of $14 billion SAC Capital. In a piece in the June Issue, Byran Burrough and Bethany McLean refer to the fund manager as the “biggest fish” U.S. Attorney Preet Bharara is going after. They have even included an illustration by André Carrilho to go with the story, “The Hunt for Steve Cohen.” As you can see, Cohen looks like he’s playing the role of Moby Dick and Bharara is Captain Ahab.

Hong Kong Hedge Fund Richland Closes (WSJ)
Hong Kong-based Richland Capital Management Ltd. closed its hedge fund operations and liquidated its two funds, Co-founder and Chief Investment Officer Alex Au said. ” We don’t want to disclose the exact reason at the moment, but our liquidation of the funds has nothing to do with the funds’ performance or any difficulties in raising another fund—our funds have outperformed other hedge funds,” Mr. Au told The Wall Street Journal. Mr. Au, formerly a trader with HSBC Holdings plc (NYSE:HBC), and Eva Lo, a former private banker at Credit Suisse Group AG (NYSE:CS), established Richland in 2006.

The hedge fund con explained (Independent)
In The Independent’s outlook column this morning I described the hedge fund industry as a “con”. Those are strong words and require something to back them up. My analysis is based on the Simon Lack’s The Hedge Fund Mirage. Buy it and read it. The crucial point, which I referred to in the article, is the difference between time-weighted returns and money-weighted returns. Using the former, Lack calculates that the returns of the hedge fund sector as a whole (using the HFRX index) were 7.3 per cent per year between 1998 and 2010. Using the latter, the annual return was just 2.1 per cent per year between those dates.

Hedge fund manager: Fed should rev up ‘printing press’ (CNN)
Speaking at the Milken Institute Global Conference Wednesday, Arbess said that Fed chairman Ben Bernanke could do a better job at keeping his “Helicopter Ben” nickname. In case you’ve forgotten, Bernanke was given that moniker during the financial crisis when he suggested dropping money from a helicopter to fight deflation. Daniel Arbess knows debt. He’s sometimes called a vulture investor since his multibillion dollar hedge fund Xerion invests in troubled companies around the world. He said the Fed is seeing diminishing returns even though it continues to increase the size of its balance sheet.

The lucrative investment trend hedge funds don’t want you to know about (CNN)
Hedge fund executives who descended on Miami last month for a conference on unpaid property taxes were treated to waterfront cruises of estates owned by Madonna, Shaquille O’Neal, and Elizabeth Taylor. But unlike those celebrity residences, the houses the profit-chasing investors were hunting at the gathering have a prosaic facade: tax liens. …The investing has only accelerated amid a federal antitrust probe of past bid-rigging at some auctions and a pullback last year by large banks from the market. Still, some hedge funds are finding help from Wall Street, as big banks that sold risky mortgages in recent years, including Wells Fargo & Company (NYSE:WFC) and Capital One Financial Corp. (NYSE:COF), extend low-interest credit to buy liens.

Fortress First-Quarter Profit Rises 75% as Markets Bolster Fees (BusinessWeek)
Fortress Investment Group LLC (NYSE:FIG), the first publicly traded private-equity and hedge-fund manager in the U.S., said first-quarter profit rose 75 percent because of higher fees paid to the firm for managing its funds. …Shares of Fortress Investment Group LLC (NYSE:FIG) gained 49 percent this year, closing at $6.53 yesterday in New York. The stock is down Fortress Investment Group LLC (NYSE:FIG) 65 percent since the company’s 2007 initial public offering, when it sold shares at $18.50 apiece to become the first U.S.-listed buyout and hedge-fund manager. The Blackstone Group L.P. (NYSE:BX), which followed four months later, has lost (BX) 34 percent of its value.

Varden Pacific hires MCAM Group to raise funds (Opalesque)
Varden Pacific, the San Francisco-based structured credit hedge fund manager launched in late 2010 by a group of senior Wall Street veterans from Morgan Stanley (NYSE:MS), Credit Suisse Group AG (NYSE:CS) and Barclays Capital, announced that it has selected alternative assets placement agent MCAM Group to raise capital internationally for its flagship Varden Pacific Opportunity Partners fund. …The firm was founded by a group of seasoned Wall Street professionals with deep, long-running expertise in structured and derivative-based assets. Varden Pacific manages assets in hedge fund and separately managed account structures, and is registered with the SEC.

Och-Ziff Q1 profit lifted by strong incentive income (Reuters)
Och-Ziff Capital Management Group LLC said its quarterly profit more than doubled and easily beat estimates as it earned much higher fees from more investors putting new money into its hedge fund portfolios. First-quarter distributable earnings, excluding costs related to its November 2007 initial public offering, reached $136.9 million, or 29 cents a share, Och-Ziff said on Thursday. Wall Street analysts expected 16 cents a share, according to Thomson Reuters I/B/E/S. A year ago the company reported $57.3 million, or 13 cents a share, in distributable earnings.

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