Sotheby’s Faces Headwinds that Could Hurt Its Investors (InstitutionalInvestorsAlpha)
The activist hedge fund firms that have been pushing for change at Sothebys (NYSE:BID) may have won their big boardroom battle. But they may be losing the war. Shares of the famed auctioneer stood at close to $45 on May 5, when the company agreed to appoint Third Point founder Daniel Loeb and two other Loeb-selected people to its board of directors as part of a compromise agreement to avert a proxy fight with the New York-based activist firm. “This is good for shareholders and we are supportive of the settlement,” wrote…
Hedge Fund Alpha Trades Shown to Lose Money (WSJ)
Investors have piled into hedge funds for years because they supposedly possess the holy grail of investing—the ability to make money through their own skillful trades, regardless of the direction of financial market moves. But the presumptive skill of hedge-fund managers may not be what it seems, new research shows. Data produced by BlackRock, Inc. (NYSE:BLK) -0.78% the world’s largest fund manager, with assets under management of $4.6 trillion, of which $51 billion is in hedge funds, breaks down the returns produced by hedge funds into what is known in industry jargon as ‘beta’, or returns due to moves in financial markets, and ‘alpha’, the highly prized ability to profit through strategic trading and stockpicking.
Is that hedge fund really worth it? (LosAltosOnline)
One expert argues that hedge funds are overpriced, nontransparent and provide poor returns over time. Simon Lack, author of “The Hedge Fund Mirage: The Illusion of Big Money and Why It’s Too Good to Be True” (Wiley, 2012) and previously a member of JPMorgan Chase & Co (NYSE:JPM)’s hedge fund due-diligence team, spoke at the CFA Institute’s annual conference in Seattle earlier this year. He explained that hedge funds suffer from some of the same problems as actively managed mutual funds. Their managers claim to be able to take advantage of market inefficiencies, improve diversification and provide lower correlations to more traditional investments.
NY Hedge Fund Tycoon Ackman Plans Perishing IPO (Jewishvoiceny)
Bill Ackman, the manager of Pershing Square Holdings, announced that he intends to take the company public. The activist investor is plans to raise $2 billion through an IPO. The hedge fund firm will list its shares on the Euronext Amsterdam Stock Exchange at $25 per share, and are expected to start trading by October 13. Ackman hopes to drive a market capitalization past $5 billion. Perishing Square said it has arranged 30 investors, with a combined commitment of around $1.5 billion…
Ex-Deutsche Bank trader Hal Lehr to set up hedge fund (Reuters)
Hal Lehr, a former trader at Deutsche Bank AG (USA) (NYSE:DB) and Soros Fund Management LLC, is set to start a hedge fund firm after receiving support from JPMorgan Chase & Co’s asset management unit, Bloomberg News reported on Tuesday. Aithon Capital is expected to be set up by January with JPMorgan investing about half of its initial capital of $100 million, the report said, citing a person familiar with the matter. The firm is likely to focus on commodity trading and JPMorgan may increase its investment to as high as $500 million, the report added. Aithon is looking to set up office at 501 Madison Avenue in New York City, the person told Bloomberg.
Hedge fund sells stake in Maple Leaf Foods (TheGlobeAndMail)
The unique marriage of Maple Leaf Foods Inc. and activist shareholder Greg Boland ended earlier this month when Bay Street fund West Face Capital Inc. sold its four-year-old stake in the company. West Face sold nearly 16 million shares in the food-processing company in two tranches starting in May, according to people familiar with the stock sale. The bulk of the holding was sold last week. “He’s gone; he’s made his money on Maple Leaf Foods,” said one person familiar with the transaction. West Face is believed to have sold the shares for total proceeds of $300-million, indicating Mr. Boland has doubled the return on his investment.
Armajaro Ward’s coffee-cocoa fund stumbles after strong start to year (Reuters)
Prominent cocoa and coffee trader Anthony Ward’s niche hedge fund stumbled in three of the past four months, giving back a chunk of gains made earlier in the year, the fund’s returns showed on Tuesday. Ward’s Armajaro Group in London saw annual return at its cocoa-and-coffee focused CC+ Fund slip to 13 percent last month from 28 percent in April, letters it sent investors and obtained by Reuters showed. The CC+ Fund is strategically important to Armajaro due to the group’s global prominence as a trader of soft commodities, particularly cocoa and coffee. Overall, Armajaro manages just over $1 billion mostly in commodities.
Texas Teachers Cut Hedge-Fund Target (Finalternatives)
Another major U.S. pension plan is taking a step back from hedge funds. The Teacher Retirement System of Texas has reduced its hedge-fund allocation by one percentage point, to 8%. The move comes just days after the largest U.S. pension plan, the California Public Employees’ Retirement System, announced plans to exit hedge funds entirely. Texas TRS, the sixth-largest public pension in the country with $126 billion in assets, won’t go that far. But it said its new asset-allocation plan, which boosts its risk parity and private markets allocations—both of which include private equity—would help it close the gap between its assets and its liabilities.
LightSquared Losses Accelerate In August (Finalternatives)
While creditors of Harbinger Capital Partners’ wireless internet venture fiddle, the company continues to burn through cash at an alarming rate. With as many as three bankruptcy-exit plans facing court hearings next month, LightSquared lost another $81.4 million last month. The company has blown through $1.6 billion since it filed for bankruptcy nearly two-and-a-half years ago. About half of the new losses were attributed to interest payments. The rest went to a reuse fee for its share of the electromagnetic spectrum—which it is barred from using due to concerns about interference with global positioning systems—depreciation, depletion and amortization.
‘Dr Doom’ Nouriel Roubini’s firm warns of 20% Australian dollar slump (SMH)
The slowdown in China and a tighter federal budget will pull Australia’s growth down to as low as 2 per cent next year, prompting interest rate cuts and a 20 per cent slump in the value of the Australian dollar, a prestigious global forecaster says. Roubini Global Economics, founded by renowned US economist Nouriel ‘Dr Doom’ Roubini, says slowing Chinese growth will hit commodity prices and Australian export volumes, while domestic consumer and investment weakness will continue to drag on the country’s gross domestic product. Dr Roubini himself earned the “Dr Doom” moniker through consistently bearish analysis, exemplified by his accurate prediction of the 2008 US housing market crash and the global financial crisis that precipitated from it.