Days of Easy Money Over for Fund Managers: Alice Schroeder (Bloomberg)
As a profit-making endeavor, managing other people’s money is hard to beat. The business requires very little invested capital. There are no worries about getting paid in full when the bill comes due, since fund managers control their customers’ money. And lackluster performance is no bar to hefty profits because fees, based on the dollar value of assets under management, are paid even when returns are abysmal. Wall Street, it often seems, is exempt from the laws of economics. Most active money managers produce worse returns than an index, such as the Standard & Poor’s 500. But making enough money to look respectable to clients has been relatively easy as long as falling interest rates boosted the value of most asset classes.
U.S. Vows to Expand Insider Trading Probe (Bloomberg)
The U.S. government vowed to continue its five-year investigation into insider trading on Wall Street as it charged a fourth ring of hedge-fund traders with using illegal information to make millions of dollars. Seven analysts and portfolio managers were accused of securities fraud in the latest sweep, the Justice Department said yesterday. The charges included the first current employee of Steven Cohen’s $14 billion SAC Capital Advisors LP to be caught up in the probe, and the highest-profile manager to be arrested since Raj Rajaratnam was indicted in October 2009.
Analyst’s Arrest Puts Cohen’s SAC In Spotlight Again (Reuters)
Hedge fund titan Steven A. Cohen is once again in the spotlight over allegations of improper trading at his $14 billion SAC Capital Advisors. The arrest on Wednesday of technology analyst Jon Horvath marks the fourth time in two years that U.S. authorities have implicated or charged a person with engaging in insider trading while working at SAC Capital. It is the latest to come from an investigation FBI agents have coined Operation Perfect Hedge.
U.S. Hedge Fund Insider-Trading Probe (Bloomberg)
Manhattan U.S. Attorney Preet Bharara discusses the insider trading cases at a press conference.
Attorney Douglas Burns On Insider-Trading Probe (Bloomberg)
Douglas Burns, a former federal prosecutor, talks about an investigation into insider trading at hedge funds by the FBI and the Justice Department. Seven people were charged in Manhattan federal court with counts including securities fraud and conspiracy as part of the five-year probe.
Attorney Mark Rifkin On Insider-Trading Probe (Bloomberg)
Mark Rifkin, a partner at Wolf Haldenstein Adler Freeman & Herz LLP, talks about the arrests of seven people in an insider-trading probe. The suspects were charged in Manhattan federal court with securities fraud and conspiracy as part of a five-year investigation of insider trading at hedge funds by the FBI and the Justice Department. Rifkin speaks with Mark Crumpton on Bloomberg Television’s “Bottom Line.”
Chiasson Gets $2.5 Million Bond In Insider-Trading Case (Bloomberg)
Anthony Chiasson, who is accused of taking part in a hedge-fund insider-trading conspiracy, was granted bond of $2.5 million, to be secured by $1.25 million in cash or property and three co-signers.
COMPLY: Advice For Latecomers To Hedge Fund Registration (Reuters)
Hedge fund advisers are scrambling to meet an unofficial registration deadline that has, until recently, been widely ignored by many mid-size firms. Mandatory registration with the U.S. Securities and Exchange Commission is looming. Hedge fund and private equity fund advisers who manage at least $150 million must register with the agency, for the first time, by March 30, according to new rules required by the Dodd-Frank financial reform law.
Marc Faber: Relax, Stocks Will Not Collapse (CNBC)
Stock markets have already discounted “some very bad news” and there is no reason to fear stocks will sink, despite gloomy prospects for the global economy, Marc Faber, publisher and editor of the Gloom Boom & Doom Report, told CNBC on Thursday. “My view is simply: relax. I don’t think that equities will collapse. I think we have major support going back to August 2010 when the S&P was at 1010,” Faber said.
Hedge Fund Tell Investments Falls Silent (Reuters)
Hedge fund Tell Investments is pulling down the shutters on 15 years of trading, after deciding the market is too tough. Its decision follows three years of disappointing performance. The fund, which has offices in Switzerland, London and Malta, is closing its two principal funds — the William and the Tell — and has started returning some 600 million euros (500 million pounds) to investors, a spokesman told Reuters.
Obama Said To Consider Nominating Summers As World Bank Chief (Bloomberg)
President Barack Obama may put his mark on the World Bank by nominating Lawrence Summers, his former National Economic Council director, to lead the bank when Robert Zoellick’s term expires later this year, according to two people familiar with the matter. During the Clinton era, Summers argued for the deregulation of the financial industry and clashed with Brooksley Born, then head of the U.S. Commodity Futures Trading Commission, over the regulation of the over-the-counter derivatives market. Those positions, along with his speaking engagements at banks and work at a hedge fund, have made him unpopular with some Democrats.
Goldman Shares Rise As Net Tops Estimates (Bloomberg)
Goldman Sachs Group Inc. (GS) climbed 6.8 percent in New York trading after the bank reported profit that exceeded analysts’ estimates, helped by a reduction in compensation costs. The firm’s target is to reduce annual costs by $1.4 billion, more than the initial $1.2 billion goal set in the middle of last year, David A. Viniar, Goldman Sachs’s chief financial officer, said on a conference call with investors today. He compared the current slowdown with the collapse of hedge fund Long-Term Capital Management LP in late 1998, the decline in technology stocks in 2000 and the credit crisis in 2008.
Greenlight Capital Q4 2011 Investor Letter (Insider Monkey)
David Einhorn’s Greenlight Capital released its Q4 2011 investor letter. Greenlight Capital returned 9.7% during the last quarter of 2011. Greenlight Capital’s net returns for 2011 is 2.9%. This is the 13th consecutive year Greenlight Capital managed to outperform the S&P 500 index. Soon David Einhorn will catch Bill Miller’s record. Einhorn followed Whitney Tilson into Dell during the fourth quarter. I think it is a smart move. We have been following Dell for a while now and will probably open a small position in Dell as well. Here is Greenlight Capital’s Q4 2011 investor letter…
Kodak Files for Bankruptcy Protection (WSJ)
Eastman Kodak Co. (EK) filed for Chapter 11 bankruptcy protection in New York early Thursday morning, after the struggling photography icon ran short on cash needed to fund a long-sputtering turnaround. The storied former blue chip said it had secured $950 million in financing from Citigroup Inc. to help keep it afloat during bankruptcy proceedings. The company also named Dominic Di Napoli, a vice chairman at FTI Consulting Inc., as its chief restructuring officer to help steer the company through bankruptcy court.
Will Hedge Fund Holdouts Scuttle Greek Swap Deal? (Reuters)
Hedge funds holding Greek bonds that mature in March may have the strongest hand in the critical negotiations to restructure the cash-strapped country’s debt. The Greek government wants to swap out that maturing debt for new, lower-yielding bonds and a small cash payment. But some hedge funds in London and New York that have snapped up chunks of Greece’s next big maturing bond, the March 20, for around 40 cents on the euro, are balking.
Hedge Funds May Sue Greece If It Tries To Force Loss (NY Times)
Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments. The novel approach would have the funds arguing in the European Court of Human Rights that Greece had violated bondholder rights, though that could be a multiyear project with no guarantee of a payoff. And it would not be likely to produce sympathy for these funds, which many blame for the lack of progress so far in the negotiations over restructuring Greece’s debts.
Middle East Interest Seen In Sukuk Bonds – Hedge Fund (Reuters)
“The interesting area for Indonesia here is the sukuk bonds. For some Middle East buyers who could not invest earlier because it was not investment grade, this is a new thing for them, which is good,” said Guan Ong, Principal at Blue Rice Investment Management, a hedge fund that specialises in fixed income. Ong, previously Chief Investment Officer at Korea Investment Corp, also said he expects a greater amount of funds to flow into Indonesia once S&P lifts its rating on the country.
Blackstone Pursuing China Deals After Exiting Evergrande JV (Reuters)
Private equity investment house Blackstone Group LP said on Thursday that it is actively pursuing further property investments in China, after a fund it controls turned a profit on the sale of its stake in a real-estate joint venture with Evergrande Real Estate Group Ltd. Late on Wednesday, Evergrande said in a filing with the Hong Kong Stock Exchange that one of its subsidiaries had bought back a 40 percent stake in the Royal Scenic Peninsula housing development in Guangzhou for $161.6 million. The sellers were MB Asia Real Estate Fund, which Blackstone now runs and that owned 69.2 percent of the stake, and hedge fund Elian Properties, which owned 30.8 percent of the stake.
Lightsquared Says Tests Finding Interference Are ‘Bogus’ (Bloomberg)
Philip Falcone’s LightSquared Inc. said U.S. government tests showing the wireless service interferes with the global-positioning system were rigged to produce “bogus results.” The tests conducted by the U.S. Air Force’s Space Command were performed in secrecy, and they focused on obsolete and niche market devices, LightSquared Executive Vice President Jeffrey Carlisle said in a conference call today.
Paris Hilton Scent Returns 218% In Parlux Takeover Seen Closing: Real M&A (Bloomberg)
Parlux Fragrances Inc. (PARL), which makes perfumes named after celebrities including Hilton and pop-music singer Rihanna, ended yesterday 76 cents below its offer from Perfumania Holdings Inc. (PERF) While Perfumania has slumped since agreeing to pay more than double Parlux’s market value in the costliest cosmetics deal relative to earnings, traders can reap an annualized return of as much as 218 percent buying Parlux shares if the company produces enough cash as a condition of the deal when it reports earnings next month, according to data compiled by Bloomberg. “In my experience in doing these types of deals, the target company rarely, if ever, signs a deal when they’re not confident that they will have the required amount of money,” Steve Gerbel, founder and president of Chicago Capital Management, a Chicago-based hedge fund that focuses on merger arbitrage, said in a telephone interview.
Volcker Rule Regulators Resist Lawmakers Calls To Scrap Proposal (Bloomberg)
Federal Reserve Governor Daniel Tarullo joined top officials from four other agencies in defending the 298-page rule today at a House Financial Services joint subcommittee hearing in Washington, faulting Congress for imposing complexities that led Committee Chairman Spencer Bachus to say the measure as proposed would be a “self-inflicted wound.” The proposed rule named for former Fed Chairman Paul Volcker, who championed the idea as an adviser to President Barack Obama, would ban banks from proprietary trading while allowing them to continue short-term trades for market-making or hedging. It also would limit investments in private-equity and hedge funds. Dodd-Frank, enacted in response to the 2008 credit crisis, requires that the rule be in place by July 21.
Requiem For David Kotz, Who Made The SEC Squirm: The Ticker (Bloomberg)
The impending departure of H. David Kotz, inspector general of the U.S. Securities and Exchange Commission, looks bad for Kotz. But his resignation, announced Tuesday, looks even worse for the SEC. Kotz succeeded Walter Stachnik, who became the agency’s first inspector general in 1989. Kotz got the job after a 108-page Senate report issued in August 2007 said Stachnik’s office had “failed in its mission” to investigate allegations that hedge fund Pequot Capital had engaged in insider trading. Kotz was supposed to be the tough investigator who would restore confidence in the tainted inspector general’s office. Don’t get your hopes up that his replacement will have a comparably intrepid approach.
Beach Energy Takeover Seen With Australia Shale 2% Of U.S. Value: Real M&A (Bloomberg)
Surging prices for shale gas and oil properties in the U.S. are turning owners of deposits as far away as Australia into potential takeover targets. “We’ll see consolidation because the LNG plants, we think, will be under-supplied with gas,” said Tim Hannon, who manages a $100 million hedge fund at Melbourne-based Evergreen Capital Partners Ltd. “If you’re a large LNG player in Australia you might want to get in first and make an acquisition.”
UK Fund Houses Hit By Client Exits (Reuters)
British asset managers suffered a wave of withdrawals in the final three months of last year, as clients fretting about a deepening euro zone crisis and choppy financial markets trimmed exposure to investment funds. Jupiter Fund Management (JUP.L) reported its first quarter of net outflows since returning to the London Stock Exchange in June 2010, while Aberdeen Asset Management (ADN.L) saw clients accelerate withdrawals at the end of last year.
Bankunited Aborts Sale, To Stay Independent (Reuters)
BankUnited Inc’s (BKU) private equity owners abruptly pulled the lender off the market on Wednesday after a brief sale process drew offers below expectations, and will instead focus on expanding in Florida and New York. The bank — which has Wilbur Ross’s WL Ross & Co, Blackstone Group LP (BX) and Carlyle Group (CYL) among its owners — wanted an offer in the high $30-per-share range, a source familiar with the situation said. It has a market value of about $2.5 billion. The deal, which came with certain protections offered by the Federal Deposit Insurance Corp, led to a rush of other private equity and hedge fund investors looking at investing in the sector and prompted regulators to put in stricter rules to govern such investments.
Investors Yank Money Out of Hedge Funds (WSJ)
After three years of the hedge fund industry trailing stock markets, some investors are growing tired of sluggish returns, data released on Thursday by Hedge Fund Research Inc. suggests. The $2 trillion hedge fund industry saw outflows of $127 million in the fourth quarter of 2011, HFR said.
Citi’s Best Aussie M&A Ideas In 2012 (WSJ)
Call it a wishlist, but the Citigroup Australian Hedge Fund Sales Desk has sent clients their best ideas for M&A in 2012. Five of the broker’s 11 picks in 2011 were subject of activity with Foster’s Group, Equinox Minerals, Eastern Star Gas across the line while Austar and Whitehaven Coal are still pending. From Citi’s perspective, friendly, all-cash deals tended to be most successful and a 30% premium to closing price tended to seal the deal.
‘Macro’ Hedge Funds Lose More Than 10% in 2011 (WSJ)
Hedge funds investing based on big-picture, “macro” themes like Europe’s debt crisis suffered one of their most gut-wrenching years in recent memory in 2011. The “Global Macro” trading strategy, one of seven tracked by the Dow Jones Credit Suisse “Core Hedge Fund Index,” finished last year down over 10%, worse than the entire index, which fell 7.4%. By contrast, the Standard & Poor’s 500-stock index ended 2011 virtually flat.
Sold Out: How A Private Meeting Between Regulators Gave Away MF Global Segregated Account Protections (Reuters Hedge World)
It seems ironic that after all is said and done, it was a hasty conference call between government regulators on October 31, 2011 that sealed the fate of MF Global segregated account protections – and placed in jeopardy the integrity of the futures markets.
New Renaissance Hedge Fund, MF Global Investor Protections Trampled, The 22-Second Share Holding And More (Reuters Hedge World)
What’s news around the hedge fund industry for Wednesday, Jan. 18, 2012…
2012 Investor Outlook: Huge Disparities, No Shift To Small Funds (AR)
Hedge fund investors entered 2012 generally averse to directional, long-biased strategies in favor of shorter term, specific investment opportunities, according to recent interviews conducted by AR. As they plan their 2012 allocations, pension consultants and funds of funds predict continued market volatility, high correlations among securities and general uncertainty resulting from assorted macroeconomic factors. But they disagree wildly about which hedge fund strategies will fare best in such an environment. With the exception of FRM, almost no one appears to be shifting their focus to smaller managers, despite the common talking point that some hedge funds had gotten too large for their own good, with their assets hindering their performance in 2011. Many investors already allocate to smaller managers and did not indicate any plans to shrink that exposure, but their disinterest in expanding it means smaller funds are likely to continue struggling to raise capital.
Pangu Capital Returns Capital To Investors (Hedge Fund Intelligence)
Hong Kong-based Pangu Capital has joined a growing list of hedge fund managers in the region that have returned money to investors. The fund was managed by Anthony Tse.
Gamma Finance Taps Think-Tank Vet As COO (FINalternatives)
Hedge fund secondary market technology company Gamma Finance has appointed Miroslaw Izienicki as chief operating officer. Izienicki comes to Gamma from the think tank and consultancy Fifth Capital, where he served as managing director. Prior to Fifth Capital, Miroslaw was head of corporate finance at Nikko Europe. Said Izienicki in a statement: “This is an exciting time to be joining Gamma Finance. Gamma is well positioned to take advantage of its leading position in the market and to develop its business across a number of fronts.”
AKO Raises US$250M For Europe Fund (FINalternatives)
AKO Capital has unveiled a Europe-focused long-only fund with more than US$250 million in initial assets. London-based AKO launched the fund on Jan. 2, it said in a Securities and Exchange Commission filing. The fund has netted more than US$251.3 million since then from four investors. AKO’s latest offering has a $1 million minimum investment requirement.
Highland Seeks End To UBS Lawsuit Over CDO (FINalternatives)
Highland Capital Management has asked a court to dismiss—for the third time—a lawsuit filed against it by UBS. The Swiss bank in September sued Highland Crusader Holdings in Manhattan state court, alleging that the hedge fund “fraudulently induced” it to restructure a collateralized debt obligation in 2008. UBS asked for more than $686 million in damages. The allegations of fraudulent conveyance and tortious interference were the only claims that a New York appeals court allowed UBS when it dismissed most of the bank’s second lawsuit in July.
361 Rolls Out Long/Short, Managed Futures Mutual Funds (FINalternatives)
Fund of hedge funds 361 Capital has launched another pair of hedge fund-like mutual funds. The new Long/Short Equity and Managed Futures Strategy funds are built on the Denver-based firm’s two existing mutual funds employing alternative strategies, a market-neutral fund and its Absolute Alpha Fund, a mutual fund of hedge funds. The long/short strategy has been used in a separate account portfolio, while the managed futures fund is similar to a counter-trend hedge fund managed by 361.
Wellington Hedge Fund Unit Launches $11M Offering (FINalternatives)
Wellington Management Co. has raised more than $11 million for a hedge fund launched at the beginning of the year. Wellington Hedge Management, a subsidiary of the Boston-based money manager, rolled out Pagosa Partners on Jan. 3, according to a Securities and Exchange Commission filing. The fund has raised $11.32 million from 16 investors.
Sal Khan: The Best Advice I Ever Got (CNN Money)
Sal Khan is the founder and executive director of the nonprofit Khan Academy, a virtual school providing software and 3,000-plus video tutorials in math, science, and other subjects. Most are taught by Khan, who conceived of the idea in an effort to tutor his cousins remotely. Former hedge fund manager; has three degrees from MIT and an MBA from Harvard. “One of the powerful things Bill Gates told me is ‘Learn to say no.’ You don’t have to make everyone happy. I’ve also learned by observing how deeply he goes into anything he cares about. How well he knew the nuances of my product was a huge signal that no manager should feel they’re above the pay grade.
Jupiter To Close Bermuda Office Following Outflows (HFM Week)
Jupiter Fund Management is to close its hedge fund in Bermuda this year, following substantial net outflows during the last quarter of 2011. It emerged today that the firm saw net outflows of £225m ($347m) during Q4, with £35 ($54m) being pulled from hedge funds, slimming the division’s assets by more than half.
Kinetic Reveals Hong Kong Office Details (HFM Week)
Kinetic Partners, the regulatory and compliance services firm, has revealed further details about the launch of its Hong Kong office, first revealed by HFMWeek in November. The move comes in response to the region’s booming financial services industry, with the office to focus in particular on regulatory compliance services and tax structures. Julian Korek, one of Kinetic’s founding members, will head up a four-strong team leading the office, supported by a team of local regulatory experts.
Graham & Dodd and Modern Financial Analysis by Joseph Calandro, Jr. (Value Walk)
The presentation focused on Warren Buffett’s acquisition of GEICO, and calculating intrinsic value for the company at the time.
Kerrisdale Capital Up 200% In 2011 (Value Walk)
The fund was up 17.6% in the quarter ended 12/31/11 net of fees, comprised of monthly returns of 10.0%, 5.3% and 1.5% for October, November and December, respectively. In comparison, the S&P 500 was up 11.8% over the quarter, comprised of monthly returns of 10.9%, -0.2% and 1.0%. The Barclay Hedge Fund Index was up 1.7% over the quarter, comprised of monthly returns of 3.5%, -1.3% and -0.3%. Since inception, the fund is up 588.0% net of fees. In comparison, the S&P 500 is up 44.0% and the Barclay Hedge Fund Index is up 17.1% during that time.
Eton Park Makes Redemptions Difficult for Investors (HFN)
New York-based firm Eton Park Capital is making it difficult for investors who want their money back. Founded in 1994 by former Goldman Sachs wunderkind Eric Mindich, Eton Park remains one of the industry’s most onerous when it comes to returning customer money, Fortune magazine reported.
Bruce Kovner Donates $20M To Julliard (HFN)
The former chairman of New York-based hedge fund Caxton Associates has made a $20 million donation to the renowned Julliard School.
Hedge Fund Investors Rotate Into Macro, Relative Value Arb Strategies (Barron’s)
After a shaky start to the year, investors contributed more money in the fourth-quarter to their favorite hedge fund managers, according to a yearly review released today by Hedge Fund Research Inc. The report found that: Total capital invested in the hedge fund industry regained the $2 trillion milestone. The industry originally eclipsed $2 trillion in assets under management in the first-quarter, then peaked at $2.04 trillion at mid-year before declining to $1.97 trillion to end a volatile third-quarter. Total hedge fund AUM finished the year at $2.01 trillion, as Q4 performance gains offset a nominal net capital outflow of $127 million. For the full-year 2011, investors allocated $70 billion of net new capital to hedge funds.
Book Review: The Hedge Fund Mirage (Aleph Blog)
In 2003 a financial gun was put to my head, telling me to relocate or be severed. I took severance because of all the ties my family had to the area. I landed at a hedge fund near me, one well enough run to be immune to the criticisms of this book. The first thing you have to understand is that corporate form is not a factor in performance. It does not matter whether you manage a mutual fund, unit investment trust, hedge fund — what matters are your ideas, not the legal form you inhabit.
Buffets Restaurants Files Prepackages Bankruptcy (Distressed Debt Investing)
As expected, Buffets (“the Company”) filed a prepackaged plan of bankruptcy earlier today with support of 83% of its senior lenders. Buffets operates the Old Country Buffet, HomeTown Buffet, Ryan’s, and Fire Mountain restaurant brands with approximately 500 restaurants across the country. For those interested in following along, you can find the bankruptcy docket here…
Maples FS Unveils Platform For Start-Up Managers (COO Connect)
Maples Fund Services (FS), the global fund administrator is launching a platform for start-up and emerging managers who are hoping to generate a track record. Managers will be charged a fixed fee. Most hedge funds joining the platform will trade vanilla strategies such as long/short equity.
Proposed EU Financial Transaction Tax Slammed By Industry Experts (COO Connect)
Industry organizations and market commentators have slammed the European Union’s (EU) proposed Financial Transaction Tax (FTT) arguing it could undermine the single market and force financial institutions to leave the EU. The FTT or “Tobin Tax” could lead to a significant decrease in cross-border trading of financial instruments in the EU thereby destabilizing the single market, said the Alternative Investment Management Association (AIMA), the hedge fund industry body.
Tom Brown Of Second Curve Capital Discussed Citi’s Earnings (Neo Alpha)
Tom Brown of Second Curve Capital was on Bloomberg discussing Citi’s (C) earnings release. He disclosed that he is long both Citi and Bank of America (NYSE: BAC). He think that the discount to book value is too great and that the capital markets in Q1 have improved such that the trading revenue will likely be better next quarter. For those not in the know, Tom Brown was the head of the financials groups at Tiger Management back in the 90s with Julian Robertson. When Tiger shut down he went out on his own. He has a pretty good track record despite getting pretty beat up in 2008.