Hedgies Braving Battered Markets to Go It Alone (Reuters)
Several high-profile hedge fund managers are preparing to strike out on their own this year, supported by strong followings and unfazed by a year of poor industry performance that has shaken investor confidence in the $2 trillion sector. Managers including ex-Gartmore star Guillaume Rambourg, ex-Barclays Capital (BARC) commodities trader Todd Edgar and Sutesh Sharma, a senior proprietary trader at Citi (C), are among those trying their luck, said several hedge fund investors and sources familiar with capital raisings in the industry.
Fortress Chief Executive Officer Daniel Mudd Steps Down After SEC Lawsuit (Bloomberg)
Fortress Investment Group LLC (FIG) said Daniel Mudd resigned as chief executive officer and a director of the New York-based hedge fund and private-equity firm after a leave of absence to respond to a government lawsuit. “I do not want the uncertainty associated with a leave of absence, on my part, to become a distraction for either Fortress or its investors, and thus, I have decided to resign,” Mudd said yesterday in a statement.
Sprott Sees Gloomy Year Ahead, But Not For Gold (Reuters)
Hedge fund manager Eric Sprott has just one word of advice for private investors in 2012: gold. The Toronto-based money manager, whose $9 billion Sprott Asset Management has made a mint for investors due to large and successful bets on metals, told an investor conference on Tuesday that everyone should make room for the shiny metal in their portfolios.
Soros: Austerity fomenting Europe tensions (Market Watch)
Billionaire investor George Soros warned on Wednesday that the austerity Germany wants to impose on other euro-zone nations “will push Europe into a deflationary debt spiral.” Germans “have been traumatized by inflation and they don’t understand the threat that deflation can cause,” Soros told reporters at the annual meeting of the World Economic Forum in Davos. “There’s a shift in German thinking recognizing this isn’t working, but we’re quite far yet from abandoning this emphasis on inflation as the only threat to stability.”
George Soros on The Coming U.S. Class War (The Daily Beast)
Has the great short seller gone soft? Well, yes. Sitting in his 33rd-floor corner office high above Seventh Avenue in New York, preparing for his trip to Davos, he is more concerned with surviving than staying rich. “At times like these, survival is the most important thing,” he says, peering through his owlish glasses and brushing wisps of gray hair off his forehead. He doesn’t just mean it’s time to protect your assets. He means it’s time to stave off disaster. As he sees it, the world faces one of the most dangerous periods of modern history—a period of “evil.” Europe is confronting a descent into chaos and conflict. In America he predicts riots on the streets that will lead to a brutal clampdown that will dramatically curtail civil liberties. The global economic system could even collapse altogether.
As Euro Crisis Fears Ease, Focus Turns To Growth (Reuters)
There is a palpable sense of hope at the annual Davos World Economic Forum that the euro zone is edging away from the brink of catastrophe but business leaders say Europe’s woes are still holding back a global recovery. Former U.S. Treasury Secretary Lawrence Summers wrote in a Reuters column this week that “anxiety about the future remains a major driver of economic performance.” That feeling is echoed among the U.S. investment community. “People are not sure what’s priced in,” said Sassan Ghahramani, CEO of U.S.-based SGH Macro Advisors, which advises hedge funds. “There is a Europe fatigue in markets.”
Trader Gougenheim eyes $50 mln Glasnost hedge fund (Reuters)
Hedge fund industry veteran Philippe Gougenheim wants to raise $50 million-plus for a highly liquid global macro hedge fund he says can guard against the unpredictable influence of euro zone politicians on markets. Gougenheim, who was head of hedge funds at Swiss fund firm Unigestion, will launch the Cayman-domiciled Glasnost fund in June, named after the former USSR’s 1980s policy of openness and transparency.
Distressed Buyers Take Wait-and-See View Amid Euro Crisis Cloud (Bloomberg)
Europe’s sovereign-debt crisis and concern about a double-dip recession in the U.S. have distressed-debt investors split on whether to buy the riskiest securities amid an expected rise in defaults, according to a survey of 100 asset managers and traders. “If you go back a year, there was perhaps more hedge fund confidence that they were going to be able to figure out and master the European problem and profit from it,” said Timothy DeSieno, a New York-based partner at Bingham McCutchen LLP, which co-sponsored the survey. “There are a few heads hanging these days having realized the governments have gone to such extremes that they’ve beaten hedgies back more than they might have expected a year ago.”
Hedge Funds Scramble to Unload Greek Debt (Deal Book)
Hedge funds that in the last month or so have purchased an estimated 4 billion euros ($5.2 billion) of beaten down Greek bonds that mature on March 20 are now trying to unload their positions, according to brokers and traders. That is because it is becoming clear to one and all that Greece — under pressure from its financial backers — is preparing to impose a broad-based haircut that would hit all investors with a loss of 50 percent or more, whether they agree to the deal or not.
Romney’s 13.9% Tax Rate Shows Power of Investment Tax Preference (Bloomberg)
Republican presidential candidate Mitt Romney’s 2010 tax returns and the 13.9 percent rate he paid highlight how wealthy investors can use the preferential treatment of income classified as capital gains and dividends to minimize payments to the U.S. government. The returns provide a glimpse into the financial life of Romney, whose campaign estimates his fortune at between $190 million and $250 million. Romney and his wife, Ann, receive money from blind trusts that invest in hedge funds and receive profits that flow from the private-equity investments Romney made during his career at Bain Capital LLC. The couple donated about 16 percent of their income to charity.
Carried Interest Debate in Spotlight amid Romney Tax Release (Bloomberg)
Democrats are reviving efforts to end a tax break for private-equity and hedge-fund executives as Republican presidential candidate Mitt Romney’s tax return shows he used it to help limit his 2010 tax rate to 13.9 percent. At issue is the tax code’s treatment of carried interest, or the share of profits that partners in private equity firms, hedge funds and real estate developments receive as most of their compensation. That income is taxed at the 15 percent capital gains rate rather than at ordinary income rates.
Quiznos Slices Up Its Debt in Restructuring (WSJ)
The troubled Quiznos sandwich chain reached a debt-restructuring deal with lenders that will hand ownership of the chain to Avenue Capital Group. The deal, approved by all Quiznos creditors, keeps the chain, known for toasted subs, out of bankruptcy court. Avenue, the hedge fund controlled by billionaire Marc Lasry, will invest $150 million in Quiznos as part of the deal, and convert some debt to equity. Avenue will own more than 70% of the chain. All told, the restructuring cuts Quiznos’s roughly $870 million debt by about $300 million.
Stakes Rise in Canadian Railroad Fight (WSJ)
Activist investor Bill Ackman said he will indemnify Hunter Harrison against any losses of his Canadian National Railway Co. pension benefits, hoping to ensure that Mr. Harrison continues to pursue the top job at rival Canadian Pacific Railway Ltd. (CP). Mr. Ackman’s move on Tuesday was the latest in an intensifying battle between the railroads.
Billionaire, Millionaire Square Off At NYC Trial (WSJ)
A longtime friendship that went sour between billionaire Ronald Perelman and his right-hand dealmaking fellow executive took center stage Tuesday at a trial over a $16 million dispute. “I never expected to be at odds with Mr. Perelman,” Donald Drapkin told a Manhattan federal court jury at a legal proceeding that flowed from the fallout of the two wealthy and powerful dealmakers. In opening statements, his lawyer, Elkan Abramowitz, argued that MacAndrews & Forbes used the flimsiest of excuses to stop paying Drapkin after he left the company “he helped build” to run a hedge fund.
Trump: Banks to Blame for Hotel Malaise (WSJ)
The U.S. hotel industry would be faring even better and perhaps expanding with new construction if it weren’t for banks’ reluctance to lend to the hotel industry. So says Donald Trump, long-time hotelier and television personality who flirted with a presidential run. Other pending hotel deals involving Mr. Trump includes his $150 million stalking-horse offer to buy the 692-room Doral Golf Resort & Spa near Miami from hedge fund Paulson & Co. and Winthrop Realty Trust, which put the resort and four others under bankruptcy protection in early 2011. Trump had lowered its offer to $150 million from an earlier $170 million, explaining that the Doral needs roughly $200 million in upkeep and renovations.
JGBs Tick Up After 1-Week Retreat On Buyback Ahead Of Fed (Reuters)
Japanese government bond prices edged up on Wednesday after a week of retreat on short-covering ahead of steps by the U.S. Federal Reserve to provide a clearer window into official thinking on monetary policy. “I thought hedge fund types would sell futures on the death cross. But we haven’t seen that happening so far. I guess many people are waiting for the FOMC now,” the trader said.
Citi Mulls Further Cuts in Securities And Banking Unit (Reuters)
Citigroup Inc. may consider further restructuring of its securities and banking unit if the business does not see meaningful revenue recovery over the course of 2012, Chief Financial Officer John Gerspach said on a conference call. Citi’s securities and banking unit includes investment banking, private equity and hedge fund operations.
Britain’s FTSE Gains, Eyes on Fed (Reuters)
Britain’s top shares rose on Wednesday after earnings from consumer technology bellwether Apple boosted sentiment, as investors bet the U.S. Federal Reserve will point to interest rates continuing at near zero for a sustained period of time. “The theme so far this year has been buying the underperformers of last year on the hope that the global economy, and especially China and Europe, have seen the bottom,” said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets.
Montag Heralds ‘New Game’ for BofA Investment Banking After Reducing Risk (Bloomberg)
Bank of America Corp.’s global banking and markets division is recovering after credit-rating downgrades ignited concern among clients and trading partners, said co-chief operating officer Thomas K. Montag. Corporate banking clients remained loyal after the downgrade, while hedge funds may have been harder to retain, Montag said. “The markets guys are a little tougher to deal with, as you know,” he said. “We’re winning them back one by one.”
Computer Associates Shares Gain After Net Beats Estimates; Boosts Dividend (Bloomberg)
CA Inc. (CA), the business-technology services provider in talks with an activist investor, surged in late trading after reporting earnings that beat analysts’ estimates and increasing dividends and share buybacks. The shares gained as much as 23 percent to $28 after the markets closed. CA had already climbed 13 percent this year. The Islandia, New York-based company said income from continuing operations rose 34 percent after sales grew in its services and enterprise software units. CA, targeted by Taconic Capital Advisors LP after the hedge fund acquired a 5.1 percent stake this month aiming to boost returns, said it will increase its annual dividend to $1 from 20 cents.
Carlyle Promotions Show Diversification as Firm Prepares IPO (Bloomberg)
Carlyle Group, the world’s second- largest private-equity firm, said less than a quarter of the employees it promoted to senior positions were in its buyout unit as the firm is expanding other businesses in preparation for an initial public offering. Blackstone, the largest private-equity firm, has reduced its reliance on private equity by expanding its real-estate unit to $30 billion of fee-earning assets and its credit business, which invests in loans and other debt, to $28.7 billion as of Sept. 30. Stephen Schwarzman, Blackstone’s chief executive officer, has said the firm’s hedge fund-of-funds unit, which has farmed out $37.2 billion to other private-equity firms on behalf of clients, is the largest in the industry.
Hedge Funds Climb Back Across $2 Trillion Threshold (Advanced Trading)
Although it’s been well-documented that hedge funds endured a difficult 2011, research shows the industry enjoyed a bit of a comeback as the year drew to a close. Data from Hedge Fund Research Inc. shows that total capital invested in hedge funds climbed back to $2 trillion to conclude 2011 as net inflows exceeded $70 billion for the year, the most investors have poured into the industry since 2007.
Can A Monkey Beat A Hedge Fund? New Study Reveals Disturbing Stats (Kapitall)
When you choose a hedge fund you do more than choose a firm with a solid history, you choose a professional broker with an impressive resume who will wine and dine you and take all of your investment concerns away. “You’re in good hands,” they’ll assure you. And you’ll believe them. Alas, after analyzing a broad sample of 1,300 funds-of-funds from 1994 through 2009, Benoit Dewaele, Hugues Pirotte, Nils Tuchschmid and Erik Wallerstein published their disturbing findings.
AlphaMetrix Acquires WR Group LLC Assets (Market Watch)
AlphaMetrix LLC, founder of the AlphaMetrix Global Marketplace (AGM), the world’s leading online marketplace for private investments, today announced it has acquired the hedge fund managed account assets of WR Group LLC.
5 Media Stocks To Buy, 5 To Avoid (Market Watch)
Merrill Lynch published a report titled “Media & Entertainment Year Ahead” on Jan. 6, 2012. The report isn’t publicly available, but we will summarize its main points. In their report, Jessica Reif Cohen, Bryan Goldberg, and Peter Henderson highlight four key themes for 2012: moderating growth of national advertising, an increase in content values, equity-friendly capital-allocation events, and possible mergers and acquisitions. The two top picks for the industry are CBS and News Corp. (MarketWatch is owned by News Corp., the publisher of this site.) We are going to discuss the stocks mentioned in this report.
7 Dirt Cheap 5 Stars Rated Stocks by S&P (Insider Monkey)
Value investing is one of the best investment strategies individual investors can use to beat the market in the long run. Even though the stock market was pretty stagnant during the last 10 years, value investors were able to return around 7 percent per year. In the search for large-cap value stocks, we ran a screen for stocks that were rated 5 stars, or “strong buy,” by Standard & Poor’s. We found the following list of 7 stocks each of which has a P/E ratio of 10 or less.
Top IT and BPO Services Stocks Recommended by JP Morgan (Insider Monkey)
J.P. Morgan published a report entitled “IT and BPO Services” on January 12, 2012. The report isn’t publicly available but we will share its main points. In the report, Tien-tsin Huang, Puneet Jain, and Dick Wei share their opinion of the IT and BPO Services stocks performing better relative to the S&P 500 in 2012. Stocks that have a high mix of offshore delivery, have the ability to cut costs of clients, have high exposure to healthcare, and have investments with a long-term impact on growth profile are preferred. The overall IT services budget is expected to be flat “with a potential for modest declines” as the macroeconomic environment worsens. Here are the stocks discussed in the report.
Jim Cramer’s Favorite Technology Stock Picks (Insider Monkey)
Jim Cramer is a former hedge fund manager. Cramer expresses his views on stocks during his TV shows, which has helped many ordinary investors who watch his show daily on TV make their own investments. We believe that by focusing on Jim Cramer’s top recommendations, investors are more likely to beat the market in the long term. In this article, we are going to focus on the technology stocks Cramer are bullish about recently. All companies have at least $10 billion market cap and were recommended by Cramer during his TV show over the past month.
Ken Griffin And Insiders Are Bullish About These Stocks (Insider Monkey)
Corporate insiders and hedge funds generally have an edge over ordinary investors. Our research has shown that investors can beat the market by focusing on the top stock picks of insiders and successful fund managers. In this article, we are going to focus on the stocks that insiders and hedge fund manager Ken Griffin are bullish about. Griffin is the founder and CEO of Citadel Investment Group. He started to trade stock options in his dorm at Harvard when he was a freshman there. Today, Citadel is one of the largest hedge funds in the world and has a reputation for outstanding execution. The fund was up 20.4% in 2011, while many other famous hedge funds suffered losses due to the European debt crisis. Below is a list of stocks both insiders and Ken Griffin love. All stocks were purchased by at least one insider over the past month and Griffin invested more than $10 million in these stocks.
BNY Mellon Taps New Luxembourg Alternatives Sales Head (FINalternatives)
Bank of New York Mellon Corp. has appointed Brian McMahon as its senior alternative industry facing executive in Luxembourg. The company has also promoted Valeria Anderson to senior salesperson, vice president, in the company’s London alternative investment services business development team. Anderson is focusing on developing the company’s business with fund of hedge funds, managed account and UCITS platforms and to expanding the company’s business in France.
U.K. FSA Mulls Alts. Bonus Rules (FINalternatives)
British regulators may extend compensation and bonus rules for banks to alternative investment firms. The Financial Services Authority is considering how to come into compliance with a 2010 European Union law, which gives the new European Securities and Markets Authority power to regulate hedge fund and private equity pay. ESMA has yet to set those compensation standards—and the FSA believes its current rules may be good enough—but the U.K. markets watchdog is moving forward, anyway.
Aberdeen Turns French Biz. Over To Ex-Hedge Fund Head (FINalternatives)
Aberdeen Asset Management has placed its former hedge fund chief in charge of its French business. Sandra Craignou was named co-head for France, alongside Frédéric Lejeune. The duo succeeds Philippe Troesch, who has left the firm.
Northern Trust Promotes Noel In Luxembourg (FINalternatives)
Hedge fund administrator Northern Trust has hired a new executive in Luxembourg. Olivier Noel was named deputy managing director of Northern Trust’s Luxembourg Management Co. Noel has been with the firm for seven years, most recently as head of transfer agency and shareholder services in the Grand Duchy.
The Shrinking Private Equity World (CNN Money)
The notoriously private private equity industry can’t escape the glare of the spotlight these days, but the more immediate issue facing the industry is a lack of funding. In 2011, U.S. firms invested just $32.1 billion in private equity, down nearly 79% from the industry’s peak year in 2007. Unlike hedge funds or other assets that offer quarterly returns, private equity funds return cash to investors only when the companies they’re invested in are sold, go public or add new debt.
California Company Hires Hedge Fund Vet (HFN)
Rotoblock Corporation, a California-based company that invests in emerging technology in China has appointed a hedge fund veteran as CEO. Prior to Rotoblock, Andrew Schneider held positions at Morgan Stanley and Prudential Securities, according to a company statement.
UK Regulatory Change Highlighted As Concern in Survey (HFM Week)
UK-focused regulatory change is of more concern to the hedge fund industry than the Alternative Investment Fund Managers Directive (AIFMD), according to a survey on regulation released today. Compliance consultant the IMS Group polled 225 individuals, including hedge fund managers, prime brokers and other industry participants, with a third naming UK changes – including the reorganisation of UK watchdog the FSA – and 23% the AIFMD as their biggest concern.
Exclusive: Brevan Howard Returns 12.12% in 2011 (Value Walk)
Brevan Howard Master fund, a $34billion hedge fund, has returned 12% for the year, versus the average long/short hedge fund, which returned 2%. The fund was down ~0.50% for December. The best performing month, was a 6% return in August.
Leon Cooperman “8-12% Returns for 2012” (Value Walk)
Omega Advisors CEO Leon Cooperman on the outlook for the U.S. economy and markets.
The SEC’s New Crackdown on Hedge Funds is Pointless (Value Walk)
Hedge fund crackdowns are on the rise, but do they really matter? Even impressive conviction rates and the seizure of hundreds of millions in illicit earnings may mean little to hedge funds, much less the public. Don’t tell that to the Wall Street Journal, which printed the following headline–“FBI Sweep Targets Big Funds”—as Friday’s above-the-fold cover story. The piece highlighted arrests made after an inside information trafficking sting identified employees of several technology and financial companies. It is the latest in several dozen similarly-themed stories the Journal has run in the past six months.
Hedge Bashers (Financial Times)
There’s a cluster of mentions around sections 4.19 thru 4.24. If you or someone close to you is a hedgie, have a cold towel to hand before consulting the detail. In short, it appears that hedge funds are being asked to provide similar levels of disclosure on pay and bonuses to that expected of UK listed companies — i.e. firms that are owned by the wider British public. And it’s way beyond the executive disclosure requirements practiced across most of the continent and also the US.
Hedge Funds Warned On Sub-Custody Risk in Struggling Eurozone States (COO Connect)
Hedge funds, which have assets held at sub-custodians in one or more of the PIIGS (Portugal, Italy, Ireland, Greece, Spain) have been advised to perform greater operational due diligence on their agent banks in the event of a sovereign default. A majority of market commentators are bracing themselves for a Greek default with some speculating the embattled country will leave the eurozone altogether. Some extreme bears even argued a Greek default will take down several weaker economies including Portugal, Italy and Spain.
Beacon Hill’s New RIA Trust Product Attracts First Customer (On Wall Street)
Columbus, Ohio-based Beacon Hill Fund Services announced their first customer for its new Advisors Investment Trust product. The product enables multiple unaffiliated registered investment advisors to co-exist in the same registered investment company. Beacon Hill expects to attract three or four other large clients this year to its new trust product, as more and more institutional advisors move money from hedge funds, SMAs and limited partnerships into mutual funds for the higher transparency, increased regulatory oversight and better reporting.
Why Average Joes Are Beating Hedge Fund Pros (Forbes)
Hedge funds, broadly speaking, were one of the worst investments of 2011. The HFRX global hedge fund index dropped by 8.9% in 2011, following gains of only 5.2% in 2010. Remember that all hedge fund indices have a structural upward bias due to survivorship bias so the actual return to hedge fund investors over the past two year is likely close to a double-digit loss.
Emerging Manager Appetite Growing, Elliott Sells Relativity Stake, Occupy Arrests At GAIM And More (Reuters Hedge World)