David Tepper is Getting Bullish on Stocks, Believes Rising Rates are Set to Stabilize (CNBC)
David Tepper, founder of Appaloosa Management whose comments have been known to move markets, said it’s very difficult to be bearish on stocks right now and thinks the sell-off in Treasurys that has driven rates higher is likely over. The major market risk has been removed, Tepper said, adding that rates should be more stable in the short term.
IFF Offers Board Seat to Activist Sachem Head’s Ferguson (Reuters)
(Reuters) – International Flavors & Fragrances Inc said on Monday it has offered Sachem Head Capital Management’s Scott Ferguson a seat on the chemical company’s board, potentially staving off a broader activist push. The hedge fund amassed a roughly $1 billion stake in IFF and had nominated four directors to its board, Reuters reported in February, after IFF completed a $26.2 billion merger with DuPont’s nutrition unit.
D.E. Shaw’s Latest Paper is a Cautionary Tale on the Efficacy of Short Duration US Treasuries (Hedge Week)
Last month the fear of inflation in the US economy reared its head. Yields on 1-year US Treasury securities bounced higher from a low of 56 basis points on 19th February to 89 basis points by close of play on 25 February. For 2-year Treasuries, they went from 109 basis points to 168 basis points. As CNBC reported, the 5-year breakeven rate, an indicator of the bond market’s expectations for inflation, rose to 2.38 per cent last month, which at the time was its highest level since pre-GFC. At the time of writing, this has ticked up to 2.43 per cent.
Former Elliott Executive Tuil to Start New Activist Hedge Fund (Bloomberg)
Former Elliott Management Corp. executive Franck Tuil plans to start a new activist hedge fund, Sparta Capital Management, later this year that will invest in public and private companies around the globe, with a particular focus on Europe, according to people familiar with the matter. Tuil, who left Elliott last year, aims to launch Sparta Capital in the third quarter with more than $600 million in assets under management, the people said, asking not to be identified because the details aren’t public. In addition to being an activist fund, Sparta Capital will also adopt a similar set of strategies that Tuil oversaw at Elliott on a smaller scale, including investing across the capital structure in both equities and credit, the people said.
Hedge Fund Managers Are Getting Inside Information From Alumni Networks, Study Finds (Institutional Investor)
Hedge fund managers are gathering private information from their alumni networks and using that trading edge ahead of merger announcements, a study found. Managers of hedge funds who are connected to directors of companies engaged in mergers increase their call option holdings on targets before the deals are announced, according to a paper from the Energy Market Authority’s Harvey Cheong, University of Hawaii professors Joon Ho Kim and Harold Spilker, and professor Florian Münkel from Canada’s Saint Mary’s University. An increased holding of bullish options to buy a company’s shares at a set price stands to be highly profitable, as merger announcements tend to prompt a rise in the target’s stock.