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Hedge Fund News: Warren Buffett, Third Point & Soros Fund Management

Will Warren Buffett win this bet? (MorningStar)
Investing icon Warren Buffett made a bet about the relative performances of hedge funds and index funds, that the latter would beat the former over a decade. The bet: Over a 10-year period commencing on January 1, 2008, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses. …The low-priced index fund that Buffett narrowed down on is the Vanguard 500 Index Admiral Shares. Only Buffett and the managers at Protégé know the names of the hedge funds. Each side in the bet put up about $320,000, and the total was invested in zero-coupon bonds that at the contest’s end would be worth $1 million.

Warren Buffett and Billionaires

Former Money Manager Charged With Stealing Hedge Fund Fees (HedgeCo)
Former hedge fund manager Sean C. Cooper has been accused of fraudulently taking excess management fees from the accounts of investors, the SEC reports. An investigation found that Cooper improperly withdrew more than $320,000 from a hedge fund he managed for San Francisco-based investment advisory firm WestEnd Capital Management LLC. While WestEnd disclosed to clients the withdrawal of annual management fees of 1.5 percent of each investor’s capital account balance, Cooper actually withdrew amounts that far exceeded that percentage. The SEC alleges that Cooper was using hedge fund WestEnd Capital Management LLC., as his own private bank.

New hedge fund makes big bet on Churchill Downs Inc. (Courier-Journal)
A new hedge fund has amassed more than 5 percent of the shares of Louisville-based casino and racing company Churchill Downs, Inc. (NASDAQ:CHDN), according to a filing with the Securities and Exchange Commission on Thursday. Three Bays Capital of Boston, led by Matthew Sidman, reported Thursday that its interests have 5.3 percent of Churchill stock as of Sept. 11. Institutional Investors Alpha reported in December that the $500 million Sidman raised for Three Bays was “one of the largest hedge fund launches in years. He also is poised to grow to at least $1 billion in 2014, according to knowledgeable sources.”

Soros manager signs up for Brummer affiliate (eFinancialNews)
According to a client letter seen by Financial News, Donald will become a Zenit partner, taking positions in such sectors as industrials, cyclical light and resources. He most recently worked at Soros Fund Management which he left in December 2012, going on to spend a prolonged period on gardening leave prior to negotiating his Zenit deal, according to a spokesman for Brummer. Zenit, a $1.7 billion long/short fund based in London, is led by chief investment officer Martin Jonsson, who has worked at Zenit since 2002…

Elliott sells £59m of Game shares despite lock-up agreement (Telegraph)
The controversial hedge fund Elliott Advisors has raised £58.5m by dumping shares in video games retailer Game Digital, despite seemingly being tied to a lock-up agreement. Elliott floated Game three months ago and committed to a lock-up agreement that restricted the further sale of shares for six months. However, Liberum Capital, the City broker, announced on Thursday that it had placed 22.5m shares in Game on behalf of Elliott. This prompted Game shares to fall by 20.5, or 7pc, to 260.00p.

Yahoo’s Alibaba’s cash (CNBC)

Silver buyers defy hedge fund exit (FinancialPost)
Buyers of exchange-traded products backed by silver are betting $11.9 billion that big speculators are wrong about the outlook for prices, which slumped today to a 14-month low. ETP holdings are up 1.5 percent since mid-July to 19,898.8 metric tons, nearing a record reached in October, data compiled by Bloomberg show. At the same time, money managers shrank bullish wagers by 95 percent, government data show. To protect against the risk of lower prices, producer Coeur Mining Inc (NYSE:CDE) has hedged about a third of its output.

Why ESL’s Sears Loan May Be Its Best Investment This Year (InstitutionalInvestorsAlpha)
Edward Lampert the hedge fund manager appears to have done a good job negotiating with Edward Lampert the Sears Holdings Corporation (NASDAQ:SHLD) chairman. The manager of Bay Harbor, Florida-based hedge fund firm ESL Investments agreed to lend $400 million to Sears, the struggling cash-strapped retailer whose largest shareholders are ESL and Lampert. Under the terms, the loan – which matures on December 31 – will have an annual interest rate of 5 percent. Sears will also pay an up-front fee of 1.75 percent of principal. The loan can be extended an additional two months for an…

Third Point Hedge Fund Sorry For Shafting Investors, Sort Of (Forbes)
Before you even think of investing in a costly hedge fund, you should be aware that there’s a good chance some unknown existing investors may have been granted special rights and privileges permitting them to profit at your expense. Feel like the red carpet has been pulled out from under you? For example, here’s a confession from hedge fund Third Point’s Part II of Form ADV filed with the SEC dated March 31, 2011: “In the past we entered into several letter agreements or other similar arrangements (collectively, “Side Letters”) with one or more Fund investors that alter or supplement terms of the relevant Fund agreement providing for increased liquidity, heightened transparency, heightened reporting and reduced Management Fees…

Peak6 Hedge-Fund Business to Spin Out From Chicago Trading Firm (WSJ)
Chicago trading firm Peak6 Investments LP is spinning out its $2.3 billion hedge-fund business, which will change its name and focus on growth by trading European credit and stocks out of a new London office. Peak6 Investments, which specializes in options trading and clearing using its own capital, told investors Thursday of the plans to sell its stake in its Peak6 Advisors hedge-fund business, according to a letter sent to hedge-fund clients reviewed by The Wall Street Journal. Peak6 Advisors will become Achievement Asset Management, continuing under its chief executive since 2012, former UBS AG UBSN.VX +0.85% executive Joseph Scoby, who’ll also be chief investment officer (See our hedge fund investor letters group).

Puerto Rico seeks to make $900 mln note deal subject to New York law (Reuters)
Puerto Rico is preparing legislation that would make an upcoming $900 million short-term financing deal subject to New York state law, a move designed to reassure mainland investors worried about the risks of investing in the indebted U.S. commonwealth. …Puerto Rico had allowed for New York legal jurisdiction for the $3.5 billion general obligation deal it undertook in March. That deal was heavily oversubscribed and very popular among hedge fund buyers.

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