Ray Dalio Sees 25% Chance of Recession This Year and in 2020 (Bloomberg)
Ray Dalio, the billionaire founder of the world’s largest hedge fund, said there’s about a 25% chance of a U.S. recession this year and in 2020 and that central bankers will be limited in addressing it. The Federal Reserve, European Central Bank and Bank of Japan “have to face the fact that when the next downturn comes there will not be the power to reverse it in the same way that existed before,” Dalio, 70, said Thursday in an interview on “The David Rubenstein Show: Peer-to-Peer Conversations.” He recommends that the Fed cut interest rates slowly, maybe by 25 basis points, without giving a time period.
Waratah Capital Launches Liquid Alternative Mutual Fund (Hedge Week)
Waratah Capital Advisors has launched the firm’s first liquid alternative mutual fund, the Waratah Alternative Equity Income Fund (WCAL4F). The new offering will operate pari-passu with one of Waratah’s flagship strategies, the Waratah Income Fund, providing high net worth (HNW) retail investors and their advisors with direct access to Waratah fund manager Jeannine LiChong. Liquid alternatives provide portfolio construction tools which offer the potential for added diversification and risk-adjusted returns. The Waratah Alternative Equity Income Fund is a long biased actively managed portfolio of North American equities, with a focus on Canada. The fund has the ability to use options and short positions for risk protection.
Hedge Fund Loses $1 Billion in One Month on Argentina Bet (The Wall Street Journal)
Autonomy Capital’s founder, Robert Gibbins, is known for making concentrated investments. Hedge fund Autonomy Capital lost about $1 billion last month largely on investments tied to Argentina, making it one of the most prominent investors caught on the wrong side of market turmoil in that country. The wager on Argentina is one of the largest for Autonomy’s founder, 50-year-old Robert Gibbins, who is known for making concentrated bets.
Kudu Investment Management Takes a Stake in Alternatives Manager EJF Capital (Opalesque.com)
New York-based Kudu Investment Management, a capital provider for asset and wealth management firms, made a minority investment in EJF Capital, an alternative investment firm that manages billions of dollars across private equity, real estate, and hedge fund strategies. Terms of the deal were not disclosed. EJF is focused on regulatory event-driven investing in financial companies and real estate; it had about $7.6 billion in assets under management as of June 30. The investment by Kudu, a firm with a passive, patient capital model, will not impact the day-to-day operations of EJF, and the firm’s investment and decision-making processes will remain the same. EJF intends to use the proceeds as strategic growth capital to invest in its existing and future funds and securitization vehicles.
Why Bill Ackman’s Fund Bucked August’s Downtrend (Market Realist)
Bill Ackman’s Pershing Square Holdings (or PSH) released its monthly portfolio update for August. According to the update, the fund netted gains of 3.5% in August. These gains are in sharp contrast to the losses posted by the major stock benchmarks during the period. The S&P 500 (SPY), the Dow Jones Industrial Average Index (DIA), and the Nasdaq Composite (QQQ) lost 1.7%, 1.6%, and 1.9%, respectively, during the month. Plus, PSH’s year-to-date gains significantly surpassed the gains in the broader stock markets. Through August 31, Pershing Square Holdings has gained 54.5%—more than triple the gains recorded by the S&P 500 during the same period.
More Broken Promises at Sears as Layoffs and Store Closures Top Original Projections (CNBC)
The parent of Sears and Kmart is set to layoff 250 employees and close even more stores than expected, putting a dent in the promises of revival laid out by its longtime chairman, Eddie Lampert. Through an affiliate of his hedge fund ESL Investments, Lampert bought Sears and Kmart after their former parent, Sears Holdings, filed for bankruptcy in October. Sears had been unable to tackle its debt load and faced robust competition from Walmart, Target and Amazon. Without the roughly $5 billion deal Lampert led, the company would have liquidated.
The Hedge Fund Manager From ‘The Big Short’ Who Predicted the Mortgage Crisis Now Says Index Funds Are the Next Market Bubble: ‘It Will Be Ugly’ (Inc.com)
Passive investment vehicles like exchange-traded funds (ETFs) and index funds have become incredibly popular, by some estimates controlling at least half of the U.S. stock market. No less an authority than Warren Buffett recommends investing your 401(k) in an index fund. “I think it’s the thing that makes the most sense practically all of the time,” Buffett says. Or not. Michael Burry, one of the first investors to predict the subprime mortgage crisis (played by Christian Bale in the movie The Big Short), claims passive investing has created a similar bubble.
OPM Merges Similar Funds of Hedge Funds (Hedge Nordic)
Stockholm (HedgeNordic) – Alternative asset manager Optimized Portfolio Management (OPM) merged two funds of hedge funds at the end of August to improve management efficiency, streamline the fund range and reduce costs. On August 30, OPM Absolute Managers was merged into the younger OPM Multi Hedge, with both vehicles employing a similar approach of investing in foreign and Swedish absolute return funds. The merger between OPM Absolute Managers and OPM Multi Hedge was completed on August 30 based on their net asset value figures as of August 29. The fixed annual management and performance-based fees charged by both funds were identical, except for their respective B share classes.
Even Billionaires Aren’t Rich Enough to Buy NFL Teams Nowadays (Bloomberg)
Suffering a dearth of bidders amid skyrocketing franchise values, the National Football League is mulling ownership rule changes designed to attract buyers outside of the richest of the rich. While the league regularly reviews its policies and procedures, the move to reexamine the strictest ownership guidelines in major U.S. sports took on new urgency after last year’s $2.3 billion sale of the Carolina Panthers to hedge fund titan David Tepper.