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Billionaires Paulson and Icahn Trim Stakes In 2 Companies; Plus Latest News on 2 Proxy Fights

According to a fresh article posted by the Wall Street Journal, the New York City Employees’ Retirement System, the largest public employee pension fund in New York City, plans to start pulling out investments in hedge fund vehicles. “Hedge funds are charging exorbitant fees for high-risk and opaque investments”, said one trustee of the pension fund. This represents yet another sign that the hedge fund industry has failed to impress their clients and investors in recent years, but the industry is still anticipated to revive in the upcoming years due to the slow-growth environment across the globe. Having said that, this article will examine four fresh filings submitted with the SEC by several widely known and successful hedge fund firms, including Paulson & Co. and Icahn Capital LP.

Imitating hedge funds and other institutional investors can help identify some of the most profitable stocks on the market. However, our extensive research that covered the period between 1999 and 2012, showed that the best approach is to follow these investors into their small-cap stocks. Our backtests showed that the 15 most popular small-cap stocks among hedge funds managed to generate a monthly alpha of 81 basis points, versus an alpha of 0.7 percentage points posted by their top 50 large-cap picks (see more details here).

Canyon Capital Seeks to Replace This Bond Insurer’s Chairman

As revealed by a fresh filing with the SEC, Canyon Capital Advisors LLC, founded by Joshua Friedman and Mitchell Julis, delivered a presentation to proxy advisory firm Institutional Shareholder Services Inc. (ISS) on Wednesday regarding the activist shareholder’s ongoing proxy fight with Ambac Financial Group Inc. (NASDAQ:AMBC). ISS, a widely known proxy advisory firm in North America, researches proxy issues and makes voting recommendations, with its decisions being able to solve proxy fights such as the one between Canyon Capital and Ambac. Specifically, the aforementioned presentation shows that Canyon Capital seeks to replace the U.S. bond insurer’s Chairman of the Board, Jeffrey S. Stein, with their director nominee Frederick Arnold, saying that “Mr. Stein has been a strong supporter of Mr. Tavakoli and his policies and has presided over the Board during the significant decline in Ambac’s stock since Mr. Tavakoli initially was appointed as Ambac’s President and CEO on an interim basis in early 2015”.

Canyon Capital has been pressuring Ambac Financial Group Inc. (NASDAQ:AMBC) to accelerate the settlement of $4 billion in insurance claims and started a proxy fight by nominating three director nominees for election to the Board at the company’s upcoming meeting of shareholders, but recently saluted the appointment of two new directors: Ian Half, a shareholder-proposed nominee, and David Herzog. Nonetheless, the Lost Angeles-based hedge fund said that “While these new directors are a welcome addition, Canyon Capital is skeptical that true change will be possible as long as the board contains only one director affirmatively proposed by stockholders and continues to be chaired by Mr. Stein”, so Canyon continues its attempts to replace the current Chairman with Mr. Arnold.

Canyon Capital owns approximately 2.2 million shares of the bond insurer, aggregately valued at $35.75 million, whereas the hedge fund’s credit exposure, including deferred payments, reaches $376 million. That’s the main reason why Ambac Financial said in recent public statements that “Canyon has as its singular objective the accelerated payment of Canyon’s credit claims, not the best interests of Ambac’s shareholders”. Going back to the aforementioned presentation, the activist shareholder says that “Ambac’s realizable value if properly managed can reach as much as $40 per share”, suggesting that Mr. Arnold could help Ambac reach that possible milestone. The shares of the bond insurer are 15% in the green year-to-date. William C. Martin’s Raging Capital Management reported owning 1.59 million shares of Ambac Financial Group Inc. (NASDAQ:AMBC) through the round of 13Fs for the December quarter.

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Let’s head to the next pages of this article, where we will discuss three other filings with the SEC.

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