Hedge Fund News: Jim Chanos, Carl Icahn, Goldman Sachs Group, Inc. (GS)

Editor’s Note: Related tickers: Goldman Sachs Group, Inc. (NYSE:GS), Netflix, Inc. (NASDAQ:NFLX), AOL, Inc. (NYSE:AOL), Nuance Communications Inc. (NASDAQ:NUAN), Prudential Financial Inc (NYSE:PRU), The Blackstone Group L.P. (NYSE:BX)

Jim Chanos Still Has ‘Questions’ About Netflix (BusinessInsider)
Netflix, Inc. (NASDAQ:NFLX) exceeded analyst expectations when it reported earnings this week, but legendary short seller Jim Chanos told CNBC’s Scott Wapner that he still has questions about the stock. Chanos thinks DVDs are on the way out, and wonders if Netflix will ever make enough money on streaming. He also wonders if the market is as high as Netflix, Inc. (NASDAQ:NFLX) CEO Reed Hastings says it is — are there enough households in the U.S. ready to use the product? Chanos points out that HBO and AOL, Inc. (NYSE:AOL) have basically topped out at 30 million users. “It’s very difficult … penetrating households in the U.S. beyond the 30 million level,” he continued. “Growth stops or slows dramatically. You gotta be careful with Netflix, Inc. (NASDAQ:NFLX) there.”


Nuance Communications Taps Goldman for Advice as Icahn Amasses Stake (WSJ)
Nuance Communications Inc. (NASDAQ:NUAN), the speech-recognition software maker in which investor Carl Icahn recently took a stake, is seeking advice from Goldman Sachs Group, Inc. (NYSE:GS), according to people familiar with the matter. The precise nature of the work Goldman is doing isn’t clear, but the Wall Street firm is often called in when companies are under pressure from investors such as Mr. Icahn who are known for pushing for major changes like the sale of a division or the entire company, or a big stock buyback. Affiliates of Mr. Icahn on April 1 disclosed a 9.3% stake in Nuance Communications Inc. (NASDAQ:NUAN), without detailing any specific intentions. The disclosure was made in a filing that indicated the investment is passive, but that wouldn’t stop the billionaire investor from shifting into activist stance later on.

Why Hedge Funds Are a Lousy Investment (MoneyMorning)
The one thing you can guarantee when investing in hedge funds is, the managers are going to get rich…even if the investors don’t. Don’t get suckered into believing you will be taking your investing strategy to the next level. The difference between reality and perception is stark and the only people sure to win are the managers themselves. The annual report on the 25 highest paid hedge fund managers came out last week and the results were no less outrageous than they have been for years: $14.1 billion in pay and paper profits on their own investments in 2012, slightly down from 2011’s $14.4 billion, according to Institutional Investor Alpha’s Rich List. You can do the math – the average top 25 hedge fund manager took home $564 million in 2012, down from $576 million in 2011. The big question is, what did these managers do for their investors to earn these kinds of sums? After all Lloyd Blankfein, CEO of Goldman Sachs Group, Inc. (NYSE:GS), took home a measly $21 million.

Wealth Managers Get Rich Looking After Your Money (iExpats)
Running a hedge fund is a sure path to riches with news that the world’s top 25 managers took home a combined fortune of £9 billion, says Institutional Investor’s Alpha. From that total, nine of them made more than £328 million each. Closer to home, Peter Hargreaves made his fortune as a partner in investment funds and is listed in the Sunday Times’ Rich List. He co-founded Hargreaves Lansdown with Stephen Lansdown and after starting trading in a Bristol bedroom they turned the firm into the one of the UK’s leading financial services businesses. Peter is now listed at number 47 on the list with a fortune of £1.53 billion while Stephen is placed 95 with a £900 million fortune.

Defense witnesses take the stand in Martinovich trial (DailyPress)
A top deputy of Jeffrey A. Martinovich said Wednesday he was unaware of any role the former financial service company CEO had in inflating the value of a solar company in which a Martinovich hedge fund owned a large stake. Kevin Cadieux was at Langley Air Force Base when he first got to know Martinovich, who’s on trial in federal court facing multiple fraud charges. Cadieux took over operations at Martinovich’s company, MICG Investment Management, in January 2008. He said he attended a series of meetings that included discussions about an MICG hedge fund called Venture Strategies that was managed by Martinovich and is a focus of the government’s case.

Lansdowne Exits Prudential Short After ‘Meaningful’ Losses (BusinessWeek)
Lansdowne Partners Ltd., the biggest European hedge-fund firm focused on stock picking, said it abandoned a more than four-year bearish bet against Prudential Financial Inc (NYSE:PRU) after suffering “meaningful” losses. Lansdowne’s $8.6 billion Developed Markets Fund exited the short position in the first quarter after determining that the stock won’t fall “any time soon,” according to a letter sent to clients this month. Lansdowne has been betting against the U.K.’s biggest insurer by market value since at least January 2009 in a wager that had a value of 259 million pounds ($395 million) last month, regulatory disclosures show. Shares of Prudential, led by Chief Executive Officer Tidjane Thiam, have more than doubled since the start of 2009 on Asian growth and U.S. annuity sales. Lansdowne said the insurer can’t sustain its Asian profits and that the annuity business is “far riskier” than investors and regulators assume.

Paulson says he’s staying the course on gold (Reuters)
Billionaire investor John Paulson told investors on Wednesday he is staying the course on gold even though there may be more short-term volatility in the price of the metal. The New York-based hedge fund manager has long stuck by his thesis that gold will someday be a powerful hedge against inflation, and it was no different on the investor call he held, two people who listened to the call said. John Reade, a partner at Paulson & Co, said that the firm, which oversees about $18 billion, is not veering off its course even as he cautioned that there could be more price fluctuations in the short term.

M&A Shuffles Roster of Big Funds of Funds (HFAlert)
Some of the biggest fund-of-funds operators grew substantially in the past year, even as total assets in multi-manager vehicles remained flat. Three of the top 10 fund-of-funds shops in Hedge Fund Alert’s annual ranking each added billions of dollars of assets via mergers and acquisitions. They include third-ranked Permal Asset Management, with $23.5 billion in multi-manager vehicles following its acquisition of $6 billion Fauchier Partners. The Blackstone Group L.P. (NYSE:BX), which ranks first with $46.1 billion, expanded its multi-manager business by 14% — not through acquisitions, but by building on its reputation as the industry leader. Rounding out the top five are second-ranked UBS ($25.5 billion), fourth-ranked Grosvenor Capital ($22.3 billion) and fifth-ranked Goldman Sachs Group, Inc. (NYSE:GS) Hedge Fund Strategies ($18.3 billion). Financial Risk Management, which ranks seventh with $16.7 billion, swelled after hedge fund giant Man Group bought the $8 billion firm and consolidated its fund-of-funds business under the FRM banner. Meanwhile, ninth-ranked UBP Asset Management grew via its acquisition of $3 billion Nexar.

Hedge Fund Managers Mixed on 2013 Outlook Despite Strong Performance Predictions (Hedgeco)
Rothstein Kass, a leading professional services provider to the financial services industry, today released its annual hedge fund outlook report entitled “Water Water Everywhere.” Produced by the Rothstein Kass Institute, the firm’s thought leadership arm, the survey, of 358 hedge funds, reveals that despite assets being at an all-time high and predictions of strong performance from most managers, many believe 2013 will be another challenging year for the industry. Those sentiments are based largely on unbalanced capital inflows that have plagued the industry since 2009.

Should the UK Quit Austerity? (CNBC)
Pimco’s Bill Gross, billionaire investor George Soros and the International Monetary Fund have all criticized the U.K. government’s austerity plan.Yet, finance minister George Osborne is sticking to the controversial policy. Last week, Fitch became the second ratings agency to cut the U.K.’s triple-A rating. Osborne has insisted the U.K. must stay the course as public sector net debt has ballooned to 1.2 trillion pounds ($1.85 trillion) or 75.4 percent of GDP. But austerity is hurting growth, which is forecast at just 0.6 percent this year. The U.K. is expected to narrowly miss a triple-dip recession when first quarter GDP figures are released on Thursday morning.

George Soros is playing with fire (Guardian)
Last summer, the financier George Soros urged Germany to agree to the establishment of the European Stability Mechanism, calling on the country to “lead or leave”. Now he says that Germany should exit the euro if it continues to block the introduction of eurobonds. Soros is playing with fire. Leaving the eurozone is precisely what the newly founded Alternative for Germany party, which draws support from a wide swath of society, is demanding.

Investor Jim Rogers May Purchase Gold If Prices Drop to $1,300 (BusinessWeek)
Jim Rogers, who predicted a commodity rally in 1999, said he may buy gold if a bear market deepens and prices fall to $1,300 an ounce or below. Bullion for immediate delivery tumbled to $1,321.95 on April 16, the lowest since January 2011, stoking a frenzy among coin and jewelry buyers from the U.S. to India and Australia. Rogers, the chairman of Singapore-based Rogers Holdings, hasn’t bought any bullion after the slump, he said in an interview. “If it goes to $1,300, I hope I am smart enough to buy some,” he said in Singapore. “If it goes lower to $1,200, I hope to buy even more. If… that’s not a prediction.”

Nouriel Roubini’s five growth triggers for Indian economy (ET)
While stating that India’s economic growth has been slow, Nouriel Roubini, one of Wall Street’s most closely followed economists has expressed confidence in the economy’s growth model, especially compared to China. Roubini thinks the Chinese growth model is not sustainable. He has no doubts that India stands at a point of advantage when it comes to exports of services, even over economies like China and European countries, and the sector has further growth potential. ET takes a look at five economic aspects of India that Roubini spoke on, the challenges that the country faces and the solution to its structural problems.

JOBS Act: What’s at Stake for Asset Managers? (InstitutionalInvestorsAlpha)
A year since President Barack Obama signed the 2012 Jumpstart Our Business Startups (JOBS) Act, hedge funds, asset managers and other sponsors of private placement offerings still eagerly await the completion of rules surrounding the marketing of those offerings to accredited investors. The JOBS Act, designed to boost job development and help small companies raise capital, contains a provision loosening the Securities and Exchange Commission’s long-standing ban under Regulation D on general advertising for private placement offerings, making it easier for hedge funds and others to tap new investors. But consumer advocates say there aren’t enough protections for investors who may lack the sophistication for playing in this alternative market.