Pershing Square: An Update on Herbalife and Second Quarter Results (The Wall Street Journal)
Pershing Square Holdings, the publicly traded security of activist investor Bill Ackman’s hedge fund, disclosed its second-quarter results Wednesday morning. More importantly, it updated investors on its views of Herbalife. Although the company has described its recent settlement with the Federal Trade Commission as a positive development, Mr. Ackman views it as very bad news. Pershing Square is short Herbalife, meaning it is positioned to gain if shares of Herbalife fall. The fund has had a difficult year. It lost 25.5% in the first quarter, primarily due to its 9% stake in Valeant Pharmaceuticals International.
Inside the High-Profile Downfall of a $8 Billion Hedge Fund (Bloomberg)
Long before Jacob Gottlieb was forced to unwind his Visium Asset Management last month amid insider trading allegations, red flags were emerging at the once $8 billion hedge fund. In its early days, Visium employed Gottlieb’s younger brother as compliance chief, a potential conflict of interest. The founder at one point owned shares in a company that his hedge fund invested in. And in early 2013, Visium funneled money from its main healthcare fund to its struggling credit team just before their bond fund shut down. Interviews with a dozen investors and former employees portray a company that was built on the cheap, with tight limits on compensation, and compliance that was at times lacking. Gottlieb, who had ambitions to build a firm rivaling the biggest hedge funds, all but shuttered Visium last month when the federal government accused three traders of securities fraud. While neither the company nor its founder were accused of wrongdoing, the allegations raise questions about oversight, said Tamar Frankel, a professor at Boston University School of Law.
Platinum Partners Hires Monitor For Hedge Fund Liquidation – Investor Letter (Reuters)
Platinum Partners, the hedge fund firm that was raided by federal agents in June, has appointed an independent monitor to oversee the liquidation of its main funds, according to a letter sent to investors Wednesday. Bart Schwartz of Guidepost Solutions will “assist…with the development and implementation of a plan for the orderly liquidation of the Funds under management,” according to the letter. Schwartz will also “report to the SEC at least monthly as to the status of our engagement, the consummation of any sale transactions, and the identification of any actual or potential violations of federal securities law, if any, which may come to our attention during the course of our oversight,” according to the letter.
SoftBank bid for ARM Catches Some Hedge Funds Off Guard (Reuters)
A Dallas hedge fund was among investors betting on a fall in the price of ARM Holdings when SoftBank Group’s surprise $32 billion bid sent shares in the British chip designer surging nearly 50 percent. The set-back for such hedge funds, who position themselves to profit from swings in stock prices, comes at a difficult time for the industry as many peers have seen their performance slide and some investors have even demanded their money back. Data from Britain’s regulator, the Financial Conduct Authority, shows that Maverick Capital had a substantial outstanding short position in ARM of roughly 1.2 percent of its shares when the SoftBank bid was announced on Monday. The data shows that Maverick had a short position of 0.67 percent as of Jan. 6 and increased that to 1.2 percent on May 3. Maverick declined to comment.
Investors Pull $600 Million From Ackman’s Fund: Report (CNBC)
Investors are fleeing from Bill Ackman‘s Pershing Square Capital funds, withdrawing $600 million during the first six months of the year according to Fortune. The cash outflow equals about 5 percent of the total amount the fund manages, but 30 percent of what could have been withdrawn since the start of the year under the fund’s rules, Fortune reported. News of the investors’ flight comes as the hedge fund hosts its second quarter conference call with investors on Wednesday, amid a couple of high-profile bad bets. Ackman bet on Valeant Pharmaceuticals which has proved disastrous, and against Herbalife, which instead has seen its shares rise in recent days.
Gulf Keystone Shares Spike And Plunge After Junk Bond Deal (Reuters)
Gulf Keystone’s stock spiked and fell by a third on Tuesday as retail investors flooded chatrooms trying to figure out how junk bond funds led by former JP Morgan and Lehman Brothers traders will help restructure the oil firm. Last week Gulf Keystone, crippled by low oil prices and non-payments from Iraqi Kurdistan, announced its bondholders had agreed to swap $500 million of debt for equity, all but wiping out some of the world’s top funds as shareholders. Little-known distressed debt funds such as Sothic Capital, co-run by former JPM trader Gertjan Koomen, and CapeView Capital, co-run for former Lehman trader Theo Phanos, are set to receive significant stakes, according to sources close to the firm and bond holders. GLG Partners, part of hedge fund Man Group, and investment fund Taconic Capital are also likely to become large equity owners: debt-holders are set to get 85.5 percent of Gulf Keystone, while existing shareholders would hold just 4.5 percent unless they buy new shares in the $25 million open offer for 10 percent of the expanded equity.
Hedge Fund Party Host Fires back At Accuser (CNBC)
The hedge fund trader who was fired after hosting a big party in the Hamptons says the event was “good clean” fun that raised $100,000 for charity. Brett Barna, a former trader at Moore Capital Management, told CNBC that while he regrets “certain aspects” of the July Fourth party in Bridgehampton, New York, the media coverage overlooked the fact that it was a peaceful, legal fundraiser for Last Chance Animal Rescue. “I regret certain aspects of the party,” Barna told CNBC. “But … this was about charity and we raised $100,000 for animal rescue and that’s a result I can be proud of.” “The event itself was nothing like what you read about. Were there people drinking alcohol? Sure. Were there people in their bathing suits at a pool party? Yes. But it was good clean fun.”