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Hedge Fund News: Kyle Bass, Edward Lampert & David Tepper

Frontiers forge ahead as emerging markets disappoint (FT)
Kyle Bass, a hedge fund manager who made a fortune betting against Greek bonds and US subprime, dropped a bombshell at a conference in September: he is investing in Argentina, Latin America’s perennial problem child and a nemesis of hedge funds. Mr Bass is unfazed by the country’s reputation, and confidently predicted that pro-business politicians would take over after presidential elections in 2015. “Argentina’s problems can be fixed in two years,” he argued. “Now is the time to start investing.” The US hedge fund manager is not the only one intrigued by the investment opportunities of Argentina.

Kyle Bass

Sears Loss Widens as Lampert Seeks Asset Sales (Bloomberg)
Sears Holdings Corporation (NASDAQ:SHLD) posted a wider third-quarter loss as Chief Executive Officer Edward Lampert works to sell more of the department-store chain’s assets to drum up cash amid a six-year sales decline. The net loss, the company’s sixth in a row, widened to $534 million, or $5.03 a share, from $498 million, or $4.70, a year earlier, Hoffman Estates, Illinois-based Sears said today in a statement. Sears said last month it would report a loss of $532 million to $582 million for the 12 weeks ended Nov. 2. Sales fell 6.6 percent to $8.27 billion.

U.S. hedge fund advisor pleads guilty to child porn charges (GNom)
Prominent hedge fund advisor Ezra Zask pleaded guilty to possession of child pornography in a New York court on Wednesday, avoiding jail time for the charges. The founder of hedge fund consulting firm SFC Associates and author of numerous books on investing was arrested in his Manhattan apartment in July of last year after police, acting on a search warrant, found numerous illegal videos and images on his computer, the New York City police department said. Zask entered the guilty plea in front of New York Supreme Court Judge Larry Stephen and is scheduled to be sentenced in March. “The agreed upon sentence is one of probation,” Zask’s lawyer Alan Futerfas said.

New complete guide to the world of hedge funds comes on the scene (Opalesque)
Daniel Capocci’s latest book, « The complete guide to hedge funds & hedge fund strategies » (Palgrave Macmillan), is the latest endeavour from an author to explain the basics of the many facets of this investment vehicle. There are no shortages of books nowadays explaining the hedge fund world, but this 500+ page book is perfectly suited for those who want a complete run around the specificities of hedge funds. Capocci is senior investment manager at Architas Multi-Manager, a member of the global AXA Group, and has been analysing the hedge fund industry for 15 years…

Former Hedge Fund Manager Indicted for Defrauding Investors (NewsroomAmerica)
Stanley J. Kowalewski has been arrested in South Carolina after being indicted by a federal grand jury in Atlanta for defrauding investors of hedge funds of up to $8 million and for obstructing the U.S. Securities and Exchange Commission’s subsequent investigation of his activities. “Kowalewski is charged with stealing from the investors who trusted him and then repeatedly lying to them and the SEC about his self-dealing,” said United States Attorney Sally Quillian Yates. “The victims of his greed include pension funds, schools, hospitals, and other non-profits who lost over $8 million in hard-earned money, which Kowalewski diverted to his own personal use.”

Activist Pushing for Change at Darden Hires Outside Advisers (NYTimes)
The activist hedge fund pushing for change at Darden Restaurants signaled on Thursday that it was ramping up its pressure. Barington Capital, which it owns over 2 percent of the restaurant group’s shares, announced that it has hired the investment bank Houlihan Lokey to conduct “an independent review” of its recommended changes to the company’s strategy. In perhaps a more intriguing move, Barington said that it had also hired MacKenzie Partners, a proxy soliciting firm often used in board fights.

Fed won’t taper anytime soon: Pro (CNBC)

Two ETFs for Your Inner Hedge Fund Hero (ETFTrends)
Being a hedge fund manager sounds glamorous and, for some, it is very, very lucrative. However, parsing through the largest individual holdings of famous investors is not as rewarding a strategy as it may appear. For example, following a basket of Baupost’s top-10 holding “beat the markets but about 9% a year since 2000. Want to follow Baupost’s top holding? BAD IDEA. Returns -0.9% a year, over 4% a year worse than the S&P,” according to Mebane Faber. Faber notes that the difference is roughly the same, about 9% a year, when applying a similar strategy to the equity holdings of Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A).

Highland Sues Ex-Partner’s Law Firm For Alleged Extortion Attempt (Finalternatives)
The ugly battle between Highland Capital Management and its former private-equity chief has taken another bizarre turn. The Dallas hedge fund has sued the law firm representing Patrick Daugherty, alleging that it sought to extort $2 million from it. Highland said in a lawsuit that Daugherty sought the money in exchange for his silence, and that Looper Reed & McGraw moved to get it for him. “Both Looper Reed and Daugherty made it clear to Highland that Daugherty would continue his efforts to slander and disparage Highland unless Highland agreed to pay Daugherty more than $20 million and that if Highland failed to do so Looper Reed intended to make it ‘bad’ for Highland,” the hedge fund alleges.

Study Shows Women Beat Men As Hedge Fund Managers (Finalternatives)
The evidence for the superiority of female hedge fund managers is growing. Another study of sex-based performance finds that women outperform their male peers in the alternative investments industry. The latest, from Rothstein Kass, shows that in the five years ending last September, an index of 67 woman-owned funds beat the broader HFRX Global Hedge Fund Index by a wide margin. The women’s index returned 3.6% over the period, while the broader index lost 3%. The reason? Women take less risk and hold on to their investments longer.

Hedge Fund Pitches 4 New Directors For Luxury Hotel REIT (Law360)
Activist hedge fund Orange Capital LLC said Wednesday that it plans to nominate four directors to the board of Strategic Hotels & Resorts Inc., renewing calls for change at the real estate investment trust in which it is a substantial minority shareholder. Over the summer, New York-based Orange first tore into Strategic Hotels, blasting the company for failing clue in shareholders about potential sale plans. With no apparent sale plans drawn up since then, the hedge fund — which holds a 4 percent stake — is…

Bidding War Erupts Over TimeGate Videogames (WSJ)
A bidding war has broken out over the rights to a pair of games created by shuttered videogame developer TimeGate Studios Inc. Hedge fund CNH Partners , an affiliate of Greenwich, Conn.’s AQR Capital Partners, said it made a higher offer for the rights to two of TimeGate first-person shooter titles—“Section 8” and the unreleased “Minimum.” According to court papers, CNH teamed with game developer Digital Tribe Games to offer $50,000 in cash plus a 25% royalty on the two games, topping a winning bid by France’s Atari SA. SouthPeak Interactive Corp., which won a multimillion-dollar arbitration award against TimeGate in their dispute over “Section 8,” also says its offer—$40,000 and a 50% royalty—is better than Atari’s, which tried to unload some of its U.S. assets in bankruptcy court earlier this year.

Hedge-Fund Managers to Share Best Ideas at Robin Hood (Bloomberg)
Hedge-fund managers including David Tepper, Ray Dalio and Daniel Loeb will help raise $5 million to fight poverty in New York by sharing some of their best trading ideas with attendees of the Robin Hood Foundation’s inaugural investors conference, said the charity’s executive director. Attendees “are going to get some of the best tips they ever had,” David Saltzman said in an interview with Bloomberg Television’s Stephanie Ruhle today. Appaloosa Management LP’s Tepper, Bridgewater Associates LP’s Dalio and Third Point LLC’s Loeb will be joined at the conference, which starts today, by former U.S. Treasury Secretaries Timothy Geithner, Henry Paulson and Lawrence Summers.

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