Hedge Fund News: Thomas Steyer, Dan Loeb, BlackRock

FARALLON CAPITALFarallon Founder Talks Green Energy At Dem. Convention (Finalternatives)
While most hedge fund managers are backing President Barack Obama’s opponent this November, Farallon Capital Management founder Thomas Steyer is keeping faith with his liberal leanings. And last week, the usually media-shy hedge fund magnate got the chance to tout one of his pet projects on a national stage. Steyer addressed the Democratic National Convention on Wednesday, one of the dozens of speakers warming up for the evening’s headline events, speeches from Massachusetts U.S. Senate candidate Elizabeth Warren and former President Bill Clinton.

Money management, Silicon Valley-style (CNN)
Joe Lonsdale is what an earlier generation would have called a young man in a hurry. A protégé of investor Peter Thiel, Lonsdale helped him build Clarium Capital into a multibillion-dollar hedge fund. Then, again with Thiel, Lonsdale co-founded Palantir Technologies, a security analytics software firm. Having made a small fortune in his twenties — he recently treated himself to a 30th birthday party at Hearst Castle on California’s Central Coast — Lonsdale has set his sights on a new challenge: designing software for the ultrawealthy.

Hedge funds challenged by the reinsurance/returns balance (InvestmentEurope)
Several hedge fund managers have backed new reinsurance vehicles with the aim of using stable premium flows in lower-risk underwriting business to support higher returns on the companies’ asset portfolios, rating agency Fitch warned today. “The business model sounds simple, but achieving these goals may prove to be challenging,” Fitch said. According to the company, making money on the asset portfolio has always been a fundamental part of the reinsurance business model, but the protracted low-yielding environment has significantly reduced this source of earnings for most players, making it harder to offset technical losses.

Hedge funds face challenge balancing reinsurance/returns (Reuters)
Several well-known hedge fund managers have backed new reinsurance vehicles, with the aim of using stable premium flows in lower-risk underwriting business to support higher returns on the companies’ asset portfolios. The business model sounds simple, but achieving these goals may prove to be challenging. Making money on the asset portfolio has always been a fundamental part of the (re)insurance business model, although the protracted low-yielding environment has significantly reduced this source of earnings for most players, making it harder to offset technical losses.

Hedge fund charges not catching on with UK mutual funds (Reuters)
Britain’s mutual funds are shunning a hedge fund-style method of charging clients, where investors pay fees as a proportion of outperformance by the fund manager, following a revolt by financial advisers selling the funds, a study has found. Research by Lipper published on Monday shows that after initial enthusiasm for performance fees in 2007, the number of funds using the structure stands at 80, compared with 112 having charged the fees at one time.

Wells Fargo re-brands LaCrosse hedge fund administration business (HedgeWeek)
Wells Fargo’s hedge fund administration and middle-office service provider, LaCrosse Global Fund Services, has been re-branded as Wells Fargo Global Fund Services. The newly-named firm will continue to provide a complete service offering to the hedge fund administration market including traditional fund administration services, operational support, derivatives processing, bank debt processing and cash/collateral management.

AIFMD will be a catalyst for the convergence of long-only and hedge funds, says Multifonds survey (HedgeWeek)
More than two thirds (69 per cent) of the fund administration industry, with combined assets under administration exceeding USD16trn, believes AIFMD will accelerate the convergence of long-only and hedge funds. This is according to the findings of an industry-wide survey on the impact of the Alternative Investment Fund Managers Directive, carried out by Multifonds.

End to ‘alpha’ a stress for fund managers (VCCircle)
It is no secret that investors of all stripes have struggled to beat the market since the financial crisis. The majority of hedge funds, for instance, have trailed both global stocks and bonds since the start of 2010, meaning that they have not added value to the simplest of portfolios. Mutual funds are not performing as badly as last year, when just 27 per cent offered better returns than the benchmark they choose to track, according to research group Lipper. But, again, the majority still trail in 2012.

Hedge Funds Buy Housing ETFs, Gold & EM: BAML (ValueWalk)
Bank of America Merrill Lynch just put out with an extensive report on hedge fund positions. In general, hedge funds seem to be bullish; they are buying SMID caps, financials, and housing, among other asset classes. The findings are very interesting and summarized below. Based on the quarterly 13F filings and estimated short positions of the equity holdings of 895 funds, BAML calculates that hedge funds cut net exposure by about 18% to $306bn notional in 2Q12, a reversal of the uptrend since 3Q11. Percentage-wise, net exposure fell from 54% to 45%. Gross exposure is little changed at roughly 150%. BAML estimates that cash holdings rose to 5.6% from 4.7%, still below the historical average of 8-10%.

Hedge Fund Gains From JPMorgan’s ‘Whale’ Losses (CNBC)
One of Europe’s largest hedge funds, Brevan Howard, reaped rewards from being on the other side of JPMorgan’s infamous “London Whale” trade earlier this year by buying up tranches of mortgage and corporate bonds. JPMorgan’s “London Whale” trades resulted in losses for the bank estimated to be at least $2 billion, a figure JPMorgan chief Jamie Dimon first acknowledged publicly on May 10.

General Growth (GGP) Lower Following Response to Ackman; No Sale Now Expected (StreetInsider)
Shares of General Growth Properties Inc (NYSE:GGP) are lower in late trading Monday after issuing a response to hedge fundgiant William A. Ackman. The stock is down 3.6 percent in late trading. The letter comes following a prior letter in August saying the firm would review Ackman’s intentions. Ackman orignally called for General Growth to put itself up for sale. General Growth was up about 12 percent since the letter was sent.

Let the Hedge Funds Speak! Why New Rules On Marketing May Be a Good Thing (Observer)
Hedge Fund Manager X dresses up in his spiffiest suit, endures the ministrations of production assistants and makeup artists and stands before Bloomberg Television cameras to talk about his recent performance and pontificate on his favorite on markets and industries. A few minutes later, a news article contextualizing his remarks flashes across terminal screens, and a few minutes after that, the same news story hits the web, where the rabid lust for any tidbit with said money manager’s name attached gives birth to dozens of blog posts and hundreds of tweets. Maybe the market moves, maybe it doesn’t, maybe the thesis will prove correct.

How One Hedge Fund Millionaire Is Trying To Buy A Seat In Congress (ThinkProgress)
Robert Mercer, the millionaire hedge-fund manager has been a consistent funder of right wing causes. In recent years, the co-CEO of Renaissance Technologies has bankrolled an Islamaphobic effort to stop a Muslim Community Center in New York City, given $1 million each to the pro-Mitt Romney Restore Our Future super PAC and Karl Rove’s American Crossroads, and spent $200,000 on ads against Rep. Peter DeFazio (D-OR), an advocate for more regulation of hedge funds. Now, public disclosure forms reveal he is the main benefactor for a new super PAC helping to elect New York Republican House candidate Randy Altschuler.

Loeb’s Third Point Owns Large Stake in American International Group (ValueWalk)
We have just obtained Dan Loeb’s Third Pointhedge fund stat sheet for August, which discloses a new position in American International Group, Inc. (NYSE:AIG) (more on the position below). Last month, we posted Dan Loeb’s Third Point LLC shareholder letter for the second quarter. Loeb discusses politics, the European crisis, and various holdings of the value oriented hedge fund. Loeb purchased a stake in Kraft Foods Inc (NASDAQ:KFT) in July. According to Third Point’s latest letter, the year to date return for the fund is 7.3%. For July the fund returned 2.3%. The flagship hedge fund currently has $4.7 billion in Assets under management (AUM). The total assets of the firm are currently, $9.2 billion. Both total AUM and AUM for the main hedge fund has increased over the past several months.

Gold ‘A Really Questionable Rally’: Hedge Fund Pro (CNBC)
Investors shouldn’t necessarily trust a bullish gold [GCCV1 1731.10 1.90 (+0.11%) ] market, calling it “a fragile rally,” Anthony Lazzara of Lido Isle Advisors told CNBC on Monday. “The problem is, is these rallies that are based on purely monetary policy around the world are very fragile rallies, and they cause a lot of volatility in the market. We could rally, we could see $1,800 and we could pull right back down,” he said on “Fast Money.” “There are a lot of people who bought gold over the last few years, and have it buried in their basement. And now the question is: If we start to see an $1,800 handle on this gold, are these people going to go down, dig it up and start putting it on the market?

Even Hedge Fund Legends Make ETF Mistakes (Benzinga)
It is safe to say that legendary investors such as Ray Dalio, George Soros and John Paulson did not become legends by making a lot of mistakes. Investing is not baseball, meaning the great players have to be great more than 30 percent of the time. Typically, the greatest names in the hedge fund business are great a lot more than 30 percent of the time. However, that does not mean they are perfect. Every investing legend has had a flub or two along the way, which implies these guys are human, too.

Carlyle Group Buys Energy Properties from Goldman Sachs (HedgeFund)
Private equity and hedge fund firm The Carlyle Group has agreed to a deal with the Goldman Sachs Group. The Associated Press reported that New York-based Carlyle will acquire Goldman-backed Cogentrix Energy. The purchase includes five coal and solar power projects in Florida, Virginia, California and Colorado.

Hedge fund money in commods at 1-year high (Reuters)
The money held by hedge funds and other big speculators in commodities has hit a one-year high, with markets rallying in anticipation of U.S. and European economic stimulus efforts, trade data showed on Friday. Led by surges in gold, oil and grains prices, the speculators — known by the regulatory moniker “managed money” — increased their bullish net long positions to above $111 billion (69 billion pounds) in the week to Sept 4, according to Reuters calculations of data issued by the U.S. Commodity Futures Trading Commission.

Lyxor: Hedge Funds Post Small Gain (Finalternatives)
Hedge funds had a positive month in August, but one that still managed to bitterly disappoint. The Lyxor Hedge Fund Index rose 0.4% last month, and 11 of its 14 strategy benchmarks also posted gains. But the Standard & Poor’s 500 Index rose almost 2% in August, and is up much more than the average hedge fund this year, about 12%.

ETF Chart of the Day: Hedge Funds (ETFTrends)
An expanding area of the ETF space is that of Hedge Fund replication products. Each fund in the category generally has a unique way of delivering returns using strategies that are typically associated with “hedge fund managers,” such as merger arbitrage of multi-asset real returns, or even managed futures. Currently, there are fourteen funds in this space, with IndexIQ’s QAI (IQ Hedge Multi-Strategy Tracker), MCRO (IQ Hedge Macro Tracker), CPI (IQ CPI Inflation Hedged), and MNA (IQ Merger Arbitrage) standing out as pioneers (they debuted back in early 2009).

Paulson Surges In August As Resort Sales Moves Forward (Finalternatives)
Paulson & Co. hopes to pull off the turnaround that eluded it last year and for the first seven months of the year, and those hopes got a shot in the arm in August. Most of the firm’s hedge funds posted gains on the month, including its flagship Advantage and Advantage Plus funds, Bloomberg News reports. Those funds were down 13% and 18%, respectively, through July, after losing 36% and 51%, respectively, in 2011.

Hedge Fund Beta Index Rises 0.67% In Aug. (Finalternatives)
Hedge funds inched up in August, again badly trailing the broader markets, IndexIQ’s suite of hedge fund replication indices show. The IQ Hedge Composite Beta Index rose 0.67% last month and is up 4.93% for the year—a better showing than most hedge fund benchmarks for 2012, but far behind the Standard & Poor’s 500 Index, which rose almost 2% last month and is up about 12% this year.

Soros Says Berlin Housing Market in Danger of Becoming a Bubble (Bloomberg)
Billionaire investor George Soros said Berlin homes are at risk of becoming overvalued because demand is being fueled by buyers seeking a safe place to put their money amid the European sovereign-debt crisis. “You have a serious danger of a housing bubble developing in Berlin,” he said at a panel discussion yesterday in Berlin. “It has a lot to do with the flight of capital and negative real interest rates.”

What’s the difference between BN and George Soros? (Malaysia-Chronicle)
In the BN Government’s on-going witch hunt against SUARAM to try to discredit us for pursuing the suspected corruption scandal over the Scorpene deal in the Paris court, they now try to suggest that there is a problem with us having received funds from George Soros’ Open Society Institute. The Domestic Trade Minister wants Bank Negara to investigate if there is “money laundering” involved. In so doing, the Minister has unwittingly put Bank Negara in an embarrassing position. George Soros is well known as a currency speculator, philanthropist and promoter of open society. What is baffling is the BN Government’s problem with Soros. From the BN Government’s propaganda, there seem to be two problems: (i) He is a currency speculator (ii) He is Jewish.

Time to Consider Investing in Russia: Jim Rogers (CNBC)
Russia’s stock market is extremely cheap and could offer interesting opportunities for investors, renowned investor Jim Rogers told CNBC. The World Bank reported earlier this year that inflation in Russia had reached its lowest point for two decades and the country’s public debt is currently approximately around 10 percent of GDP (gross domestic product), compared to the U.S. where it has reached 100 percent.

Navistar fires back after Icahn criticism (BizJournals)
Navistar International Corp. said Monday that its board and management “have a clear path forward,” responding to criticism by billionaire investor Carl Icahn. The Lisle, Ill.-based engine and truck maker issued a statement saying it is “extremely disappointed” that Icahn chose to pursue what it called “unproductive tactics,” the Chicago Tribune reports. On Sunday, Icahn made public a letter in which he called for Navistar (NYSE: NAV) to immediately offer four board seats to shareholders and criticized the company for naming a new CEO without consulting large shareholders.

Mantel, Self Join Debut Novelists on Man Booker Shortlist (Bloomberg)
Hilary Mantel and two first-time novelists were among six finalists for the Man Booker Prize for Fiction, the U.K.’s most prestigious literary award. Sponsored by hedge-fund manager Man Group Plc., the contest brings the winner a prize of 50,000 pounds ($80,000) and the promise of an almost certain increase in book sales.

Soybean Reserves Smallest in Four Decades After Drought (Bloomberg)
The smallest U.S. soybean harvest in nine years will leave inventories in the world’s largest exporting nation at the lowest in four decades. U.S. farmers will reap 13 percent less than a year earlier after the worst Midwest drought in 76 years, according to the average of 34 analyst estimates compiled by Bloomberg. Reserves will be the lowest since 1973 by March, estimates INTL FCStone Inc., which handled $75 billion of physical commodities in 2011. Futures will advance 16 percent to an all-time high of $20 a bushel in three months, Goldman Sachs Group Inc. predicts.

BlackRock fined $15 million for UK rules breach (Reuters)
BlackRock, the world’s largest asset manager, has been fined 9.5 million pounds ($15 million) by Britain’s financial regulator for failing to adequately protect client deposits. The Financial Services Authority (FSA) said on Tuesday it handed out its largest ever fine to an asset manager after BlackRock failed to follow rules aimed at protecting clients’ money should the firm face insolvency.

California urges fed probe of eminent domain “threats” (Reuters)
California Lieutenant Governor Gavin Newsom says he wants the U.S. Department of Justice to investigate “threats” against local communities that are considering using eminent domain to seize and restructure poorly performing mortgages to benefit cash-strapped homeowners. …In his letter, Newsom said a New York-based hedge fund threatened via email, a company that was involved in a municipal program to purchase mortgage loans by using eminent domain. He did not name the hedge fund, but noted that the email had been sent to 21 other investment firms.

Talisman Energy’s Chief Steps Down (WSJ)
Talisman Energy Inc. said early Monday that its president and chief executive, John A. Manzoni, has agreed to step down after five years with the company, effective immediately. The Calgary oil-and-gas company—one of Canada’s 10 largest by market capitalization—has been the subject of speculation about a possible takeover for the better part of a year, as it struggles with an industrywide downturn in natural-gas prices. Talisman has also struggled in the North Sea, where one of its platforms has suffered a number of construction setbacks.

SEC Charges Atlanta-Based Firm for Compliance Failures as Brokers Churned Customer Accounts (SEC)
The Securities and Exchange Commission today charged three former brokers at an Atlanta-based brokerage firm for “churning” the accounts of customers with conservative investment objectives, causing severe investor losses while the brokers collected handsome fees. The SEC also charged the head supervisor at JP Turner & Company, Michael Bresner, as well as the firm’s president William Mello and the firm itself for compliance failures. JP Turner and Mello agreed to settle the SEC’s charges, while an administrative proceeding will continue against the three brokers and the supervisor.

Wilshire: Local government pension plans’ funded status rises for fiscal 2011 (PIOnline)
The aggregate funded status of local government pension plans was 80% for the fiscal year ended June 30, 2011, up eight percentage points from a year earlier, according to a report from Wilshire Associates on 106 city- and county-sponsored defined benefit plans. Pension assets increased by 15% to $367.8 billion, while liabilities grew 4% to $461.1 billion.

Missouri school, education pension funds see positive returns (PIOnline)
Missouri Public School and Education Employee Retirement Systems, Jefferson City, reported returns for the year ended June 30, with the public school pension fund returning 1.9% and education employee pension fund, 1.6%, confirmed Stacey McNally, executive assistant, investments, for both pension funds, in an e-mail.

MC Asset Management Names Curran Pres/CEO (Finalternatives)
Stamford, Conn.-based MC Asset Management Holdings has named Patrick Curran president and CEO. Curran comes to MC from Raymond James where he served as a managing director, leading the firm’s efforts in asset management and capital markets technology and services investment banking. Prior to Raymond James, he was a managing director of Lane, Berry and Co. (which was acquired by Raymond James). Curran was also a co-founder and managing partner of Lane Berry’s private equity affiliate, Mainspring Capital Partners. Before joining Lane Berry, Mr. Curran was a partner at Great Hill Partners, a private equity firm.

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