HEDGE FUNDS INVESTMENTS - Education, Investment Company, Market News: Hedge Funds

Hedge Fund Returns Are Falling Because Hedge Fund Returns Used To Be Just Great

ridodirected@gmail.com (RIDO) — Sat, 10 May 2014 01:14:00 +0000

Tim Worstall, Contributor
Posted on 5/09/2014 @ 10:58AM
Article from http://www.forbes.com/

Dam McCrum over at FT Alphaville has a look at why the top hedge fund managers are making so much darn money. I don’t disagree with anything he says I just want to pick up on a point and expand it. For we can explain some of what has been happening just with some pure Adam Smith from a couple of centuries ago. what is being said here about new and small hedge funds also rather applies to the entire industry:

Small and young hedge funds are nimble, their managers are focused, and they can concentrate their capital in a small number of good ideas without moving prices or attracting attention. One study by Barclays found that funds under two year’s old, and managing less than $100m typically make better investment returns than their larger older peers.

They’re also more likely to blow up entirely of course. However, back to Smith.

Adam Smith pointed out, not in exactly these words but we can modernise his prose, put it in the demotic, that capitalists are greedy little so and sos. They’re always looking to make larger profits than they are currently. We can look around us and see that there’s an average rate of return to capital in the economy: we might adjust that for risk these days in the way that Smith didn’t. But his point was that there is this average and everyone’s always looking for ways to make more than this average. This is what drives people into looking for new businesses, new ways of doing business, to see if they offer super, or above this average level of, profits.

Of course this doesn’t stop there: some will find a method of making these higher profit levels. At which point others will note what is happening and start to move their own capital over into this new field. At which point we’ve several people competing for these super-profits and they get competed away. Thus, possibly with a bit of overshoot, that newly colonised business area reverts back to the average profit level of the entire economy.

We can see this in those new and small hedge funds. They come up with a new tactic, a new method of investing, perhaps they spot some correlation that no one else has as yet. When new and small they can make their profits out of what they’ve understood about the economy better than anyone else. But if they consistently make those extra profits then people are going to come looking at what they’re doing and start to copy them. And no inefficiency in the economy is large enough for everyone to exploit it at the same time. It’s the very success of the new techniques that attracts more capital and thus competes away those extra profits.

We can also say much the same about the hedge fund industry as a whole. Back a couple of decades there were a few hundred billions in the entire global industry. A decade and more before that only a few tens of billions. Those early funds really did have vast success: they were very definitely making super profits. Thus more capital flooded into the sector until there’s $2.7 trillion in it now. It might be premature to say that the industry is now entirely mature and creating only the average profit level of the entire economy (recall, we must adjust for risk to make this comparison) but it would certainly be true to say that it is maturing. The average return of the average fund is not notably above general investment returns elsewhere.

All of which is as Adam Smith would have predicted: the early success of the new method attracted ever more capital to the sector until those super profits are being competed away.

Tim Worstall, Contributor
Posted on 5/09/2014 @ 10:58AM
Article from http://www.forbes.com/

How Hedge Funds Are Pushing Companies To Leave America

ridodirected@gmail.com (RIDO) — Sat, 03 May 2014 04:27:00 +0000

Nathan Vardi, Forbes Staff
Posted on 5/01/2014 @ 12:00PM
Article from http://www.forbes.com/sites/nathanvardi/

Mallinckrodt is a pharmaceutical company specializing in pain treatment. Its name may sound foreign, but it traces back to the Mallinckrodt brothers, who founded the company in St. Louis in 1867. Most of the company’s sales take place in the U.S. and its main corporate office remains in Missouri. The one major foreign component of Mallinckrodt’s story is its legal domicile, which has been located for tax purposes in Ireland ever since it separated from Covidien and reemerged as an independent public company in 2013.

The biggest backers of Mallinckrodt are two of the nation’s most prominent hedge fund managers. The hedge fund of billionaire John Paulson, who became one of the nation’s richest men betting against subprime mortgages, is the biggest shareholder of Mallinckrodt with a 9.7% stake. Activist hedge fund manager Barry Rosenstein’s Jana Partners, which likes to impose its views on corporate management, is the third biggest shareholder in Mallinckrodt with a 5.69% stake.

In April, Mallinckrodt struck a deal to buy California-based Questcor Pharmaceuticals for $5.6 billion in cash and stock. Questcor is a controversial company that has dramatically increased the price of its key immune system drug. But Mallinckrodt’s Ireland domicile makes the deal compelling and paying taxes there will lower Questcor’s tax rate by 10%, according to Mallinckrodt.

Paulson is publicly pushing for the deal. Last week, Paulson’s hedge fund agreed to support the Mallinckrodt acquisition of Questcor with all the shares it owns in both companies in a deal that gives Paulson the ability to buy just under 20% of the company. Mallinckrodt’s Questcor acquisition comes on the heels of Mallinckrodt’s tax-driven $1.3 billion deal originally announced in February for San Diego-based Cadence Pharmaceuticals . “Mallinckrodt is an outstanding company with excellent management that is growing rapidly due to both internal and external factors,” Paulson & Co., said in a statement. “Competitive tax rates is just one of many factors that make the company an attractive investment.”

Prominent hedge funds are helping to fuel the wave of so-called inversion deals that are structured to lower tax rates by moving the domiciles of U.S. companies, particularly those operating in the pharmaceuticals sector, to foreign jurisdictions like Ireland. It’s pretty clear that Wall Street has cheered on the inversion trend, feasting on the investment banking fees generated by these deals, and that the markets even enjoy an increase in price of the stocks of both the seller and the buyer on the day the deals get announced. The business development offices of major U.S. pharmaceutical companies like Pfizer clearly know what they are doing. But hedge funds are playing a role in encouraging and even creating corporate deal machines that are engaging in tax-driven deals. For hedge funds, these deals are essentially a tax arbitrage trade. One place where these deals is less popular: Washington. The Obama Administration has said that “inversion transactions raise significant policy concerns because they facilitate the erosion of the U.S. tax base” and Pfizer’s recent $100 billion tax-lowering bid for AstraZeneca will only increase political attention.

But hedge funds are moving faster than Washington. Billionaire hedge fund manager William Ackman had never made a pharmaceutical investment before April. But last month his Pershing Square hedge fund made its biggest investment ever, taking a 10% stake in California-based Allergan. Ackman is making the $4 billion bet while working with Valeant, a company based in Canada whose senior executives work in New Jersey and has its tax-domicile in Barbados. Valeant has made a $45 billion bid that is driven by tax considerations to buy Allergan with Ackman.

Valeant itself is a hedge fund-created machine. ValueAct Capital Management, the activist hedge fund run by Jeffrey Ubben, has been a major shareholder for years and ValueAct’s Mason Morfit sits on the company’s board. Morfit even designed the highly-lucrative compensation package of Valeant CEO Michael Pearson, who has become a billionaire since he started running the company six years ago. When ValueAct got involved and Pearson started running the show, Valeant was based in California. Valeant then bought and folded the company into Canada’s Biovail to take advantage of Canada’s tax rules. Using Valeant’s lower tax structure, Pearson has done about 100 or so deals since 2008 and pushed Valeant’s stock up by some 800%.

Also in April, a group of high-profile hedge funds started to pressure Walgreen, America’s biggest pharmacy chain that is based in Illinois, to move to Europe for tax purposes. The Financial Times reported that activist hedge funds like Barry Rosenstein’s Jana Partners and Keith Meister’s Corvex Management, together with billionaire Dan Och’s Och-Ziff Capital Management hedge fund and Goldman Sachs, urged Walgreen’s senior management in a meeting in Paris to domicile its tax base in Europe as part of its $16 billion takeover of Alliance Boots, which is based in Switzerland.

Another major recent inversion story, Endo International, has been a den for so-called Tiger Cub hedge funds. John Griffin’s Blue Ridge Capital hedge fund owns 5% of the company. Other big Tiger Cub holders have been billionaire Stephen Mandel’s Lone Pine Capital and billionaire Andreas Halvorsen’s Viking Global Investors. A non-Tiger Cub owner of the stock is Jana Partners. The company was based in Pennsylvania, but moved its domicile to Ireland after agreeing in November to buy Canadian-based Paladin Labs for $1.6 billion. Halvorsen’s hedge fund sold its position in the company in the quarter when the deal was announced. There is no evidence Endo’s hedge fund investors did anything to support Endo’s decision to do an inversion deal, but they certainly benefited when the stock popped after the deal was announced.

Nathan Vardi, Forbes Staff
Posted on 5/01/2014 @ 12:00PM
Article from http://www.forbes.com/sites/nathanvardi/

Activist hedge funds target Europe amid increasing power

ridodirected@gmail.com (RIDO) — Tue, 22 Apr 2014 08:52:00 +0000

By Ashley Armstrong
6:00AM BST 22 Apr 2014
From http://www.telegraph.co.uk/finance/

The City will increasingly be targeted by activist hedge funds with 40pc of funds reporting they are looking at opportunities outside North America

Activist hedge funds have tripled the amount of money under management in the past five years and are aiming their cash piles at Europe, according to research compiled by FTI Consulting and Hedge Fund Research.

Such funds managed more than $93bn (£55bn) last year, almost triple that of five years ago and 42pc up from an estimated $65bn in 2012. The overall hedge fund industry is worth around $2.5 trillion.

Investors are pouring into activist funds, driven by higher returns of 16.6pc last year on investment which has far outpaced the average hedge fund return of 9.3pc.

As activism becomes a growing asset class for investors, proponents will have more power to increase their influence on M&A transactions and funds will be able to target even larger companies.

Out of the sample of economic activist funds engaged in more than 500 situations, 89pc believed there would be an increase in general activism, with involvement in M&A situations showing biggest increase this year.

According to the survey, 40pc of US investors are now looking at shifting their focus outside North America. Most recently, gaming analyst Jason Ader’s Spring Owl fund has gained a 6.1pc stake in bwin.party and has proposed four representatives onto the board. Edward Bramson’s Sherbourne Investments has taken a stake in Electra, following a passive involvement in 3i and a much more activist role in F&C Asset Management.

Transport company FirstGroup is also fighting pressure from US hedge fund Sandell Asset Management, and Elliott Investors has taken a stake in grocer Wm Morrison. Cevian Capital has also taken a stake in embattled security group G4S.

Cevian, one of Europe’s biggest activist investors, has said that it takes around three to five years to implement changes in larger companies.

In M&A, it is common for activists to take positions in target companies and push for an increase in the offer price – a practice that has been dubbed “bumpitrage”. However, the survey of leading economic activists by FTI Consulting in partnership with Activist Insight, has shown that 43pc of them are now willing to take positions in buyers and convince them not to do the deal.

Activists are also becoming more sophisticated in engaging with social media for maximum affect.

“When Carl Icahn took an activist stake in Apple, he announced it via Twitter,” Steven Balet, managing director and activism specialist in the Strategic Communications segment at FTI Consulting, said. “The impact was immediate and moved the markets – it was a lesson that everyone in the activist community noted and one that is likely to be emulated.”

By Ashley Armstrong
6:00AM BST 22 Apr 2014
From http://www.telegraph.co.uk/finance/

Boeing is the new hedge fund favorite

ridodirected@gmail.com (RIDO) — Mon, 20 May 2013 12:35:00 +0000

By Maureen Farrell @Maureenmfarrell May 17, 2013: 1:41 PM ET
Article from http://money.cnn.com/

NEW YORK (CNNMoney)

Hedge fund managers are boarding Boeing.

It's unclear whether the top hedge fund managers would bet on riding one of Boeing's troubled Dreamliners, but Boeing (BA, Fortune 500) was the favorite stock of the top 50 hedge fund managers in the world in the first quarter of 2013, according to FactSet.

Hedge funds poured roughly $1.6 billion into Boeing, helping push the airplane manufacturer's stock up 31% so far this year.

Apple (AAPL, Fortune 500) was once the "it' stock among hedge funds. That's changed.

Last year, the iPad maker was the most widely held stock among hedge funds. Now only 40% hold Apple.

Google (GOOG, Fortune 500) is now the most widely held technology stock: 62% of the top hedge funds have a stake in Google.

SAC Capital and Soros Fund Management both hold stakes in Google, but it's too soon to know whether we will see Steven A. Cohen and George Soros rocking pairs of Google Glass.

That shift in hedge fund loyalty mirrors the performance of both stocks in 2013. Apple's stock is down 19% since the beginning of the year, while Google's is up 28%.

Hedge funds have also grown disenchanted with insurer AIG (AIG, Fortune 500) and Rupert Murdoch's media giant News Corp (NWS). Funds reduced exposure to both stocks by 16% and 20% respectively during the first quarter, according to FactSet

Overall, hedge funds upped their bets on stocks in the first quarter. The Securities and Exchange Commission mandates that hedge funds disclose stock holdings 45 days after the close of a quarter.

So it's not clear just yet what hedge funds did in April and so far in May. Hedge funds are also not required to reveal what stocks they are betting against through short selling.

First Published: May 17, 2013: 12:45 PM ET
Maureen Farrell @Maureenmfarrell May 17, 2013: 1:41 PM ET
Article from http://money.cnn.com/

Hedge funds shop at Supervalu, sour on Apple

ridodirected@gmail.com (RIDO) — Fri, 17 May 2013 08:37:00 +0000

By Sam Forgione and Aaron Pressman | Reuters – Wed, May 15, 2013

Article from http://news.yahoo.com/

NEW YORK (Reuters) - Barry Rosenstein's JANA Partners liked grocery chain Supervalu Inc in a big way in the first quarter, while Philippe Laffont's Coatue Management lost its stomach for the company's shares.

Regulatory filings revealed that JANA, a hedge fund with $5.5 billion in assets, picked up some 14 million shares of Supervalu in the quarter ended March 31. For Laffont's $9.5 billion firm, however, it was a different story, as the hedge fund dumped all of its roughly 10 million shares.

Leon Cooperman's $9 billion Omega Advisors also jumped into Supervalu, opening a 6.87 million-share position, a filing revealed.

Hedge fund managers and other large investment firms on Wednesday filed so-called 13-F reports with the U.S. Securities and Exchange Commission, shedding some light on how they traded in U.S. stocks in the first quarter.

The filings also showed just how much Apple Inc's star dimmed in the first quarter.

Chase Coleman's $12 billion Tiger Global Management sold 790,000 Apple shares in the quarter, while Cliff Asness's $80 billion AQR Capital Management sold about 150,000 shares.

But the regulatory filings only tell a small portion of the story because they offer no explanation for a fund's buying and selling of U.S. stocks. The filings also don't require money managers to disclose short positions, or bets a stock will decline in price.

So there is no way of knowing what motivated Coatue to exit shares of Supervalu, which doubled in price in the first quarter, after the grocery chain struck a deal in January to sell some of its supermarket chains to Cerberus Capital Management for $3.3 billion. Similarly, it is not clear what prompted JANA and Omega to jump into the stock, but it could be the funds see the chain as a turnaround story.

The 13-F filings then are an imperfect look into the stock trading strategy of large funds. It is also important to note that in the 45 days since the first quarter ended, some of the reported stock positions may have changed.

Jeffrey Gundlach, a co-founder of DoubleLine Capital, a $60 billion bond shop that is moving into equity investing, said he never looks at other manager's 13-F filings.

With that caveat, here is how big money managers traded in the first quarter, broken down by sectors and actively traded stocks:

APPLE

Appaloosa Management, a $14 billion hedge fund led by David Tepper, reduced its stake in Apple by 40 percent to 540,000 shares.

Coatue Management added 562,546 shares of Apple, lifting its total stake in the iPhone and iPad manufacturer to 1.2 million shares.

OTHER TECH

Farallon Capital Management, a $20 billion hedge funded led by Andrew Spokes, took a new 2.46 million-share stake in computer manufacturer Dell Inc, which is embroiled in a contentious corporate buyout.

INTERNET

JANA, which has a reputation for shareholder activism, opened a new 25.5 million-share stake in online social gaming company Zynga Inc.

JANA also opened a 21.9 million-share position in online coupon company Groupon.

Passport Capital, a $3.7 billion fund led by John Burbank, opened up a 2.2 million-share position in Yahoo Inc. But Tiger Global sold 14 million shares.

FINANCIALS

Appaloosa reduced its holdings in several financial stocks. The hedge fund, for instance, cut its stake in American International Group Inc by 29 percent to 4.3 million shares. Meanwhile, Seth Klarman's $28 billion Baupost Group increased its stake in AIG by 70 percent to 11.9 million shares.

Farallon raised its stake in American Express Co by 2.1 million shares.

TELECOMMUNICATIONS

Eton Park Capital Management, a $19.4 billion fund led by Eric Mindich, reduced its stake in Sprint Nextel Corp to 18.5 million shares from 23.1 million.

HEALTH

OMEGA sold all of its shares of health insurers Humana Inc and Wellpoint Inc.

(Reporting by Samuel Forgione, Svea Herbst-Bayliss, Aaron Pressman, Rodrigo Campos, Emily Flitter, Manuela Badawy and Tim McLaughlin; Compiled by Matthew Goldstein; Editing by Steve Orlofsky)

Sam Forgione and Aaron Pressman | Reuters – Wed, May 15, 2013

Article from http://news.yahoo.com/

Forging Its Own Path, British Hedge Fund Finds Success

ridodirected@gmail.com (RIDO) — Wed, 15 May 2013 08:24:00 +0000

By WILLIAM ALDEN
May 13, 2013, 4:31 pm
Article from http://dealbook.nytimes.com/

Ewan Kirk, left, and Erich Schlaikjer of Cantab Capital Partners, whose fee structure, investing strategy and entrepreneurial spirit have generated buzz.

Ewan M. Kirk never quite fit the Wall Street mold.

As a partner at Goldman Sachs, he wore a kilt to the firm’s annual black-tie dinner in New York. After leaving Goldman, Mr. Kirk, an astrophysicist by training, set up a hedge fund in Cambridge, England, a world away from the fashionable neighborhood of Mayfair in London where many hedge funds are based.

But Mr. Kirk’s firm, Cantab Capital Partners, has been turning heads recently in London and New York with a new fund that aggressively undercuts its competitors on fees. The fund, which uses computer models to trade on trends in markets around the world, opened to outside investors in the first quarter and grew to more than $600 million by the beginning of April.

Unlike rival funds, in which the price of investing is often 2 percent of assets and 20 percent of profits, Cantab charges a 0.5 percent fee and 10 percent of profits for its new fund. That structure has generated buzz in Mayfair at a time when lackluster returns have some big investors wondering whether hedge funds are worth the expense.

“They’ve lowered the fees to a point that not everybody can afford to do,” said Phillip G. Chapple, an executive director at KB Associates, a consulting firm that advises London hedge funds. “It’s quite scary.”

Cantab is not the only fund to lower its fees. Since the financial crisis, some other hedge funds have also moved to lower the cost of investing. The Children’s Investment Fund, which is based in London, charges performance fees of 15 percent to 16.5 percent, with hurdles that must be cleared before fees are paid, according to a person close to the fund. Two funds run by Renaissance Technologies, in East Setauket, N.Y., have performance fees of 10 percent, a person close to the firm said.

About 11 percent of hedge funds in Europe charge performance fees less than 20 percent, compared with 5.7 percent of hedge funds in the United States, according to Hedge Fund Intelligence.

To Mr. Kirk, 52, who founded Cantab in 2006 with Erich Schlaikjer, a colleague from Goldman, the new product is a logical outgrowth of his primary investing strategy. With the technological infrastructure in place, it was relatively inexpensive for Cantab to introduce the new program, which takes a more conservative approach with lower volatility.

That technology puts Cantab — a relatively small firm with about 40 employees and $5.3 billion under management — in a position to shake up the market.

“Do I think that another random hedge fund is going to suddenly decide to cut their fees to a half and 10? No, I don’t,” Mr. Kirk said. “That would effectively destroy their business model.”

Run by scientists and mathematicians with ties to the nearby University of Cambridge, Cantab fosters an eccentric laboratory atmosphere. Certain devices, like a 3-D printer and a rice cooker powered by a neural network, are in the office simply to amuse the employees.

A technophile, Mr. Kirk claims to have no view on the political and economic dramas that obsess some money managers. Even his Friday lunch order is steeped in science: the office uses an algorithm to determine what type of food to buy.

But almost despite himself, Mr. Kirk is gaining recognition as a financier. Last year, Cantab’s flagship fund returned 15.3 percent when comparable funds in London suffered losses. In 2008, with the financial crisis gathering, Cantab returned 48.7 percent.

Though the firm’s record is mixed — it lost 9.2 percent in 2009 — it has attracted billions of dollars to manage, growing from just $30 million. Last November, with investors clamoring to get in, Cantab determined it had reached capacity and shut the doors on its fund.

As if to signal his arrival among the Mayfair elite, Mr. Kirk made his debut in April on a ranking of the wealthiest hedge fund managers in Britain published by The Sunday Times, which estimated his net worth at £280 million, or $433.3 million.

Born in Swindon, England, and brought up in Glasgow, Mr. Kirk did not set out to work in finance. He developed a model of gravitational radiation for his Ph.D at the University of Southampton and started a career in computer systems design. When he landed at Goldman in 1992, he devoured books on futures and options to get himself up to speed.

“I couldn’t balance my own checkbook,” he told an audience of Ph.D mathematics students at the University of Cambridge several years ago.

But Mr. Kirk learned finance quickly, rising to become the head of the strategies group in Europe, where he oversaw Goldman’s quantitative technology.

“Ewan was known to be very — at Goldman, we used the term ‘commercial,’ “ said Jay S. Dweck, a former head of equities strategies at Goldman, who was in Mr. Kirk’s partnership class. “He was good at generating profit for the business.”

Mr. Kirk’s success helped him secure a deal on his departure to pay for continued access to Goldman’s in-house software — what Mr. Dweck called the “magic that every firm wanted to try to reproduce.”

That deal, according to Mr. Dweck, who was involved in the negotiations, was “unique.” A spokeswoman for Goldman declined to comment.

Cantab said in a letter to investors in December that it had been making progress in developing its own information-technology infrastructure. As part of that transition, the hedge fund revised its deal with Goldman last year; instead of fees, Goldman now has a small ownership stake in Cantab.

As the only prominent hedge fund in a region dominated by technology companies, Cantab can make a unique pitch to university students who might not have considered finance as a career. One such hire, Tom Howat, now a partner at the firm, hurried to finish his Ph.D in mathematical biology so he could join Cantab on its first day.

During the job interview in a local pub, Mr. Kirk described Cantab as a “start-up technology company that happens to apply itself to finance,” Mr. Howat, 31, recalled in a recent essay.

That entrepreneurial spirit means Cantab can have some fun. Last year, in the Cambridge Dragon Boat Festival, a race on the River Cam, the team from Cantab finished second in the mixed division.

The team also won best dressed, outfitted in the style of Noah’s Ark with zebra, giraffe and meerkat costumes.

Such self-expression wasn’t part of the culture at Goldman, as Mr. Kirk learned the hard way.

He wore the kilt only once, “given the slightly strange looks I got turning up at a fancy New York partners’ dinner wearing a dress,” he recalled. “It certainly created a little bit of a stir.”

A version of this article appeared in print on 05/14/2013, on page B6 of the NewYork edition with the headline: Forging Its Own Path, British Hedge Fund Finds Success.

WILLIAM ALDEN
May 13, 2013, 4:31 pm
Article from http://dealbook.nytimes.com/

Hedge-fund billionaire Falcone agrees to SEC ban

ridodirected@gmail.com (RIDO) — Mon, 13 May 2013 06:45:00 +0000

By James O'Toole @jtotoole May 9, 2013: 5:11 PM ET
Article from http://money.cnn.com/2013/05/09/investing/falcone-ban/index.html

NEW YORK (CNNMoney)

Hedge-fund mogul Phil Falcone has agreed to a two-year ban from serving as an investment adviser after the Securities and Exchange Commission charged him with fraud last year.

The SEC accused Falcone, the head of hedge-fund firm Harbinger Capital Partners, of manipulating bond prices, playing favorites with clients and borrowing $132 million from a Harbinger fund to pay his taxes. In announcing the allegations last year, former SEC enforcement director Robert Khuzami said the charges "read like the final exam in a graduate school course in how to operate a hedge fund unlawfully."

In an SEC filing Thursday, Harbinger Group (HRG) -- a holding company that owns a number of businesses and is also headed by Falcone -- said he and Harbinger Capital had reached an agreement in principle to settle with the SEC without admitting or denying the allegations, as is common in the agency's cases.

Under the proposed settlement, which requires a judge's approval, Falcone would be barred for two years from raising new capital or making new investments, and Harbinger would be required to comply promptly with redemption requests from investors. Falcone -- whose net worth Forbes Magazine pegged at $1.2 billion as of March -- would be obliged to pay a $4 million penalty, while Harbinger Capital would pay $14 million.

Spokesmen for the SEC and Harbinger Group declined to comment.

Falcone can still manage Harbinger Capital and remain head of Harbinger Group. The latter firm owns several insurance- and finance-related companies, and holds a majority stake in Spectrum Brands, which produces consumer products, including Remington razors.

Harbinger Capital is the main backer for upstart wireless carrier LightSquared, which filed for bankruptcy last year shortly after U.S. regulators barred it from turning on its network, citing concerns about interference with GPS devices.

LightSquared, which is in the process of crafting a reorganization plan, says it will "continue to work with both government and industry to address legal and technology issues" related to its network.

James O'Toole @jtotoole May 9, 2013: 5:11 PM ET
Article from http://money.cnn.com/2013/05/09/investing/falcone-ban/index.html

Hedge Fund's Hottest Investment Ideas: Gundlach, Chanos and Ackman

ridodirected@gmail.com (RIDO) — Sat, 11 May 2013 05:56:00 +0000

By Chris Ciaccia, May 10, 2013, 10:43:52 AM EDT
Article from: http://www.nasdaq.com/article/hedge-funds-hottest-investment-ideas-gundlach-chanos-and-ackman-cm245189#ixzz2SxcfIlOd

The Ira Sohn Conference offers some of the best ideas the hedge fund world has to offer, and this year was no different, with luminaries such as Jeffrey Gundlach, Bill Ackman, and Jim Chanos offering ideas to the investing community.

Jeffrey Gundlach, who last year said he was to short the high-flying Apple (AAPL), took a shot at another high-flier, Chipotle Mexican Grill (CMG). DoubleLine Capital's Gundlach said that Chipotle is a good short, due to the fact he hates the chart. He noted he loves the product, but increased competition from taco trucks, Taco Bell(YUM), and other fast-food companies moving into higher-end products will impact Chiptole in the future.

Gundlach, who has been dubbed the "Bond King" by Barron's, recommended other short ideas, as he believes the Fed's quantitative easing is going to end badly. He said that insurance companies have not factored in low interest rates into their models, and should be avoided as long as we're in a low interest rate environment. He also said to short French bonds, noting the French are a basket case." Gundlach also said avoid bank deposits, and gold, as quantitative easing has changed the game, and investors should play by the new rules.

World famous short-seller Jim Chanos took a shot at the PC space, saying the hard disk drive makers are likely to see sharp share price declines in the next twelve months.

Chanos, who runs Kynikos Associates, believes PC sales are only just starting to decline as tablets, especially Apple's iPad take wallet share. In tune, the hard disk drive decline will be more pronounced than the PC decline. The two largest players in the space, Western Digital(WDC) and Seagate Technologies(STX) appear to be cheap, but are "value traps." The two companies have vastly outperformed the likes of HP and Dell over the past three years, aided in part by the Thailand flood, which caused prices to spike. Chanos believes this is unsustainable, and all you have to do is look at the industry to see why. Toshiba (TOSBF), the third largest hard disk drive maker, expects its margins to be cut in half, and Samsung (SSNLF) exited the business, selling it at .5 times revenue to Seagate.

If the declining business prospects weren't enough, there's also accounting issues at Seagate, especially with the Samsung purchase. The company took a $1 billion in goodwill on the purchase, something which Chanos questioned openly. The company is also seeing sizable drop in insider holdings from the executive suite, and the company's chief technology officer, Bob Whitmore, stepped down abruptly, though he still remains with the company.

Pershing Square's Bill Ackman has been in the news regarding his battle with Herbalife, but the noted hedge fund manager took the chance to speak about something much less newsworthy: Procter & Gamble (PG).

Pershing Square, who owns 29 million shares of the Cincinatt-based conglomerate, believes P&G is vastly under earning its potential. With strong profitability, high barriers to entry, exciting global growth opportunities, and limited private label competition, P&G could earn as much as $6 per share by 2016, up from $4 per share today. The company is embarking on a $10 billion cost savings measures to help this, but Ackman believes it could do more.

The company never fully integrated its Gillette purchase, it has suboptimal manufacturing, an inefficient organizational design, its marketing investments are not reaching the appropriate returns, and pricing is not optimized. P&G should generate consistent 5% organic growth. as its key competitors are doing 4-7% organic growth. The company should have a 24% EBIT margin, up from 19% today, just via cost savings, with gross margins between 52% and 54%.

If P&G can earn $6 per share, it deserves a 20 multiple by 2016, trading at $120 per share.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Chris Ciaccia, May 10, 2013, 10:43:52 AM EDT
Article from: http://www.nasdaq.com/article/hedge-funds-hottest-investment-ideas-gundlach-chanos-and-ackman-cm245189#ixzz2SxcfIlOd

Taveras invests 20% in hedge funds, more than Raimondo

ridodirected@gmail.com (RIDO) — Thu, 09 May 2013 05:20:00 +0000

May 8th, 2013 at 4:20 pm by Ted Nesi under Nesi's Notes, On the Main Site
http://blogs.wpri.com/

It turns out that the Democratic gubernatorial hopeful who has the biggest chunk of pension money invested in hedge funds isn’t Treasurer Gina Raimondo – it’s Providence Mayor Angel Taveras.

Providence has invested 19.75% of its total pension assets in hedge funds, the Taveras administration disclosed Tuesday after WPRI.com requested a breakdown of its investment portfolio.

Rhode Island’s state pension system has invested somewhat less in hedge funds – 14.6% of assets as of April – under a new investment strategy implemented by Treasurer Gina Raimondo soon after she took office in 2011.

Providence’s Board of Investment Commissioners, which is chaired by the mayor and oversees the city’s pension portfolio, started investing in hedge funds on the advice of its longtime financial consultant, Boston-based Wainwright Investment Counsel, Taveras spokesman David Ortiz told WPRI.com. The investment board meets roughly once a month.

Ortiz said the city was already investing nearly 20% of its money in hedge funds when Taveras succeeded now-Congressman David Cicilline in January 2011. Raimondo, by contrast, moved to add hedge funds to the state’s portfolio a few months after she took over from Frank Caprio that same year.

“The asset mix in Providence’s pension portfolio has remained essentially static since we took office,” Ortiz said. “We relied on the advice of Wainwright. They’ve managed the city’s portfolio for many years, and the fund has performed well relative to peers.”

Providence’s pension investments earned an 11.2% return during 2012, less than the 12.5% that the state’s investments earned, according to Ortiz and the State Investment Commission. Providence expects to earn an average return of 8.25% on its investments over the long term, while the state expects to earn 7.5%.

Ortiz said the Taveras administration didn’t have information available about the amount of fees it pays to hedge funds, although city officials “asked a while ago” for Wainwright to provide details.

“We’re awaiting reply,” he said.

Raimondo’s investment strategy has come under withering criticism over the last month from Forbes.com contributor Edward Siedle, president of Benchmark Financial Services, who argued in one post that “the smart pension money would steer clear of hedge funds, not pile into them.”

Robert Walsh, executive director of the National Education Association Rhode Island teachers union and a frequent Raimondo critic, quipped recently that the treasurer’s defense of her hedge-fund strategy might as well rely on “magic beans,” tweeting: “Top corporate pension funds have 2% in hedge, not 20%+.”

Taveras is now planning to review Providence’s heavy investment in hedge funds, according to Ortiz.

“Recently, compelling questions have been raised about hedge funds and other nontraditional investments by public retirement systems,” he said. “We’ve asked Wainwright for more information about those kinds of investments in Providence’s pension fund, including the fees paid to investment managers.”

Coincidentally, Raimondo said during her 2010 campaign that Providence’s pension fund invested $1 million in Point Judith Capital, the venture capital firm she co-founded, after Wainwright approached Point Judith and then recommended the investment to the Board of Investment Commissioners.

Providence’s pension fund is significantly smaller than the state of Rhode Island’s. Their assets totaled $326.5 million and $7.2 billion, respectively, as of June 30. Following the adoption of separate overhauls pushed through by Taveras and Raimondo, the city’s pension plan is 36% funded and the state’s plan is 59% funded.

by Ted Nesi under Nesi's Notes
http://blogs.wpri.com/

Indian hedge funds dare where foreign investors fear

ridodirected@gmail.com (RIDO) — Tue, 07 May 2013 06:30:00 +0000

By Subhadip Sircar and Rafael Nam
MUMBAI | Mon Apr 29, 2013 1:08pm IST
From http://in.reuters.com/article/

(Reuters) - Indian hedge fund manager Kalpesh Kinariwala is so sure of his equity strategies in a country that has stumped foreign rivals that he sends a daily e-mail tracker of his performance - including to competitors.

Kinariwala's Capveda Capital (India) Advisory fund, which he runs from a modest office in a decrepit industrial estate in Mumbai, has returned 11.86 percent so far this year, outperforming average negative returns of 2 percent from India-focused foreign hedge funds.

Local hedge funds are eager to show off double-digit returns in the hopes of drawing wealthy Indians and succeeding where overseas players including HSBC Holdings PLC (HSBA.L) have failed. Local market knowledge and the lack of foreign currency exposure will favour domestic funds, but it remains to be seen whether Indians would embrace new investment styles in a country that traditionally prefers buying and holding stocks.

"It will be very difficult," said Samir Arora, founder of Singapore-based Helios Capital, which manages hedge funds focused on India.

"India is a small market, and hedge funds will have to show experience shorting, and they will have to appeal to a high net worth crowd, requiring (costly) distributors," said Arora, who shut one of his India-focused funds called "Jai Ho," named after the Oscar-winning theme song from Slumdog Millionaire in 2011.

Investing approaches such as an equity long-short strategy are still a novelty in India, making it harder for hedge fund managers to attract local wealthy individuals.

To raise the bar even more, domestic investors are not used to the high fees commanded in the hedge fund industry.

Funds also face a high success threshold in a country where plain vanilla bank deposits offer nearly double-digit returns, with consumer price inflation of around 10 percent.

Costs are another challenge.

To reach wealthy investors, funds are relying on distributors with deep rolodexes who don't come cheap, charging commissions of 25-30 percent of gross earnings in the first few years.

In light of the challenges - on top of an unruly rupee - overseas hedge funds have retreated from India over the last few years.

Assets under management for overseas hedge funds focused on India have shrunk by 68 percent from 2007 to $2.1 billion in March, according to data from Eurekahedge.

The data also shows India-focused foreign funds returned 12.3 percent last year - a period when the rupee was whipsawed by economic worries - well under the 25.7 percent gain in the broader BSE share index.

HSBC was among the casualties, shutting its India-focused fund run by high-profile manager Singapore-based Sanjiv Duggal earlier this year after cash withdrawals from investors.

GRAPHIC: India-focused hedge fund performance link.reuters.com/nud57t

GRAPHIC: AUM for Indian equity funds link.reuters.com/hud57t

START SMALL

India's regulators have formally approved 10 domestic hedge funds since last year under new rules aimed at organising the industry. Overseas funds are not regulated.

Local funds are planning to start small.

The average size of funds is expected to be around 1-2 billion rupees, according to industry players.

They are targeting wealthy individuals and corporations, who must be convinced to pay the industry standard fees of 1.5-2 percent for management and 15-20 percent of profits, high by Indian standards.

"We will be very selective, probably reject nine out of 10 strategies," said Himanshu Kohli, co-founder of Client Associates, which advises individuals and families on wealth management.

"Wealth creation is a relatively young process in India. The biggest concern for investors is to protect their capital," he said.

Local hedge fund managers are betting that a vibrant stock futures market would make it easier to undertake shorting strategies.

Average daily futures and options volumes on the National Stock Exchange have nearly tripled to 1.32 trillion rupees from four years ago. However, not all stocks can be traded in the derivatives segment.

Perhaps the biggest potential cost headache is taxation, given the lack of clarity on whether capital gains duties are to be borne by the fund or by the investor.

Kinariwala, who is waiting for formal approval of his fund under the regulator's reorganisation, is not bothered.

He is targeting returns of 18-24 percent, more than double the 7.8 percent yield offered by the 10-year government bond, and says his performance will convince investors of the merits of his trading models that he bases on monitoring market momentum.

"If somebody is demonstrating a good track record, the sky is the limit," said Vaibhav Sanghavi, who heads a long-short fund at Mumbai-based financial group Ambit Capital, which received a hedge fund license this month.

(Additional reporting by Abhishek Vishnoi in MUMBAI and Nishant Kumar in HONG KONG; Editing by Tony Munroe and Ryan Woo)

From http://in.reuters.com/article/

Ex-Millennium Traders to Start Asian Equity Hedge Funds

ridodirected@gmail.com (RIDO) — Thu, 12 Apr 2012 17:17:00 +0000

By Tomoko Yamazaki and Komaki Ito - Apr 12, 2012 3:54 PM GMT+0800

Article from Bloomberg

Former traders at Millennium Management LLC plan to start new hedge funds that will mainly invest in Japanese equities to capture demand as the nation’s equities rebound from the worst year since 2008.

The Japan-focused Terra Grove Japan Fund and the Terra Grove Pan Asian fund, which will invest in Japan, Hong Kong, Australia, South Korea and Taiwan, will start in May with total capital of about $25 million, said Tetsuo Ochi, chief executive officer of Hong Kong-based MCP Asset Management Co., the investment manager. Both funds aim to raise about $150 million each in about a year, after which they will stop taking money from clients until they enhance the trading models, Ochi said.

Japanese stocks posted the best quarterly start to the year since 1988 after dropping 17 percent in 2011. Masakatsu Hayashi and three others joined MCP in March after leaving the Singapore office of Millennium, the $15 billion hedge fund founded by Israel Englander.

“Many overseas investors are underweight Japan, and many bigger funds are already closed to new investors, so we’re seeing some interest from those who want to have a Japan exposure,” Ochi, whose firm oversees about $6 billion in assets, said in a telephone interview.

Frequent Trading

The funds will employ a so-called equity long-short strategy, which seeks to profit from rising and falling prices, Ochi said. The managers will focus on trading the positions frequently, with average turnover of about 10 percent a day and using their own statistical arbitrage models, he said. The Japan fund will target annual returns of about 15 percent and the pan- Asian fund will aim for 20 percent, Ochi said.

Asian hedge funds struggled last year amid an increase in volatility in markets as concerns over the European sovereign debt crisis and China’s growth prospects weighed on investors.

Asia-focused funds tracked by Eurekahedge Pte oversaw $124.1 billion at the end of last year, 29 percent less than the peak in 2007. They lost an average 8.4 percent in 2011, underperforming the 4.1 percent loss for hedge funds globally, according to Eurekahedge indexes.

The new funds start as the industry recovers from news that AIJ Investment Advisors Co., which offered hedge-fund strategies, allegedly lost more than $1 billion of clients’ money, which were mostly smaller Japanese pensions.

‘Isolated Case’

“We’re still hearing that the AIJ incident is more of an isolated case, though money flow may stall for a bit,” Ochi said. “Millennium is a well-established firm, so there are expectations that these guys will do well.”

Goldman Sachs Group Inc. and Deutsche Bank AG will be prime brokers of the funds, according to Ochi. Prime brokers provide services such as stock and cash lending, and trade clearing for hedge funds.

Hayashi, who worked as a fund manager at Millennium in Singapore, previously worked as the head of statistical arbitrage in Asia at Societe Generale SA in Tokyo. He’s joined by Akira Suzuki, Atsushi Kiyono and Kohei Hayashi, all from Millennium Capital Management (Singapore) Pte, Ochi said.

Englander, who worked as a floor broker on the American Stock Exchange, founded New York-based Millennium in 1989 with $35 million. It employs about 1,000 people, including more than 120 investment managers, according to the firm’s website.

Separately, MCP Asset said it has signed a memorandum of understanding on a strategic alliance with South Korea’s Woori Asset Management (WOAMCZ)as part of its effort to expand. Under the agreement, MCP and Woori will jointly develop alternative investment products including hedge funds for Woori’s clients.

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net.

Article from Bloomberg

Five New Hedge Fund ETFs Planned

ridodirected@gmail.com (RIDO) — Tue, 10 Apr 2012 19:59:00 +0000

Apr 10 2012 | 1:05pm ET

Article from Fin Alternatives

A pair of exchange-traded fund issuers are set to launch hedge fund strategies relying on firms' quarterly holdings reports.

Global X Funds has filed for four such ETFs and First Trust for one with the Securities and Exchange Commission. The latter's Hedge Fund Manager Holdings Index Fund will track a Wells Fargo index that includes the 100 stocks most widely held by hedge funds based on Form 13F filings with the SEC.

New York-based Global X has a more ambitious plan, although three of its planned offerings will also invest in hedge fund holdings based on 13Fs. But two will focus on activist and value hedge fund managers, while another ETF will invest in publicly-listed hedge fund firms.

The Top Activist Investor Holdings ETF and Top Value Guru Holdings ETF will rely on benchmarks crafted by Structured Solutions. The former will base its holdings on the holdings reported by top activist hedge funds on their 13Fs, and the latter on the top value managers. Global X will also launch a fund tracking the holdings of the world's largest hedge funds.

A fourth fund will invest in listed hedge funds, based on a Structured Solutions index.

Article from Fin Alternatives

Five Things to Ask Before Investing in a Hedge Fund

ridodirected@gmail.com (RIDO) — Sat, 07 Apr 2012 07:32:00 +0000

Published: Friday, 6 Apr 2012 | 4:35 PM ET

By: Paul O'Donnell,

Article from CNBC.com

Marc Freedman, a Boston-area financial advisor, likes to compare hedge funds to cigarettes. Regulations govern how they can be marketed, and to whom; both hedge funds and smokes come with stern warnings about the risks involved; and anyone who wants to buys them anyway—if they can afford them.

By law, individuals must be worth at least $1 million to have access to a hedge fund. Institutional investors are required to have $100 million in assets.

Figured this way, Freedman says, it doesn’t much matter that the JOBS Act, signed yesterday in a Rose Garden ceremony by President Obama, lifts a decade-old ban on advertising by hedge funds and private equity firms. “Whether they advertise or not, there are suitability requirements,” says Freedman, president of Freedman Financial in Peabody, Mass. “Maybe one percent of the population would even qualify to deal with a hedge fund directly.”

Freedman isn’t alone in thinking that worries about the end of the ban are overblown. Defenders of the industry point out that hedge funds won’t likely be advertising in any traditional sense—hiring a Don Draper to put together TV commercials or buying up the naming rights to stadiums. In practice, the effect of the ban was to limit what fund managers could say in public about their products.

“Under the old rules, part of my job was to keep hedge-fund managers from talking about what they really do,” says Mitch Ackles, president of the Hedge Fund Association, a public-relations group. “You turn on CNBC and see them being interviewed, but only about their views on the economy, not their specific business.”

By allowing hedge-fund managers to talk more openly about their products, the new rules will make hedge funds more transparent, says Ackles, increasing the information available, so investors can make educated decisions. The openness will in turn foster employment in the hedge-fund industry, as new MBAs and other jobseekers come to understand the business better.

"Under the old rules, part of my job was to keep hedge-fund managers from talking about what they really do.”

Mitch Ackles

president, the Hedge Fund Association

Still, no one seems to disagree that the JOBS Act puts the onus on investors to know what they are getting into. Whether the idea comes from a hedge fund directly, a notice in a newspaper or through a trusted advisor, the usual safe-investing advice still applies.

“Have the fund provide the Alternative Investment Management Association’s due-diligence questionnaire,” he says. “It’s the industry standard, and most managers usually have already filled them out. “

Hedge funds engage a broker to execute their trades. Check with the brokerage firm that the hedge fund has an account with them as they claim. “You should perform a background check on all their service providers,” says Ackles, especially the fund’s administrator—the outside vendor who handles accounting and other back office chores. “Are they with a Big Four accounting firm, or some guy in a shopping mall?” A self-administrated fund is probably not a good bet.

While you’re talking to the administrator, ask whether the fund manager has a personal stake in the fund. "If they believe in their strategy, they should have some skin in the game,” says Ackles.

Meet with the fund manager in person. Take a look at the operation and the equipment he or she is using. “If they are day trading, they should have Bloomberg terminals,” Ackels says. If the employees are using substandard equipment or working out of a private home, you can generally take it as a bad sign.

The most important question is for yourself: How much of an investment makes sense? Successful hedge funds put up their alluring numbers by making very aggressive bets in the market. Even the wealthiest investor can’t afford to live on high risk alone. “This is an investment for a sliver of your portfolio,” warns Marc Freedman, “not the entire pie.”

Article from CNBC.com

Best Hedge Funds: First Quarter 2012

ridodirected@gmail.com (RIDO) — Thu, 05 Apr 2012 09:29:00 +0000

By Insider Monkey 04/04/12 - 12:36 PM EDT

Article from The Street

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

Finance industry makes up nearly half of pro-Romney super PAC's donations

ridodirected@gmail.com (RIDO) — Mon, 02 Apr 2012 21:03:00 +0000

Posted: 04/ 2/2012 9:05 am
Article from Huffington Post

By Alexandra Duszak and Rachael Marcus, iWatch News

Last summer, hedge fund pioneer Julian Robertson made the maximum $2,500 contribution to Mitt Romney's campaign for the Republican presidential nomination. With a net worth somewhere north of $2 billion, it seemed as though he could do a lot more.

Thanks to the Supreme Court's Citizens United decision, he did.

Robertson gave $1.25 million to Restore Our Future, a super PAC that has underwritten a relentless advertising campaign ripping Romney's opponents. That's 500 times the contribution he made in June.

Robertson is not alone. Of the $43.2 million raised by the attack PAC, $20.5 million, or 48 percent, came from finance industry donors, according to an analysis of Federal Election Commission data by the Center for Public Integrity.

At least $13.5 million came from private equity firms ($7 million) and hedge funds ($6.5 million) while most of the rest came from investment banks and other asset managers. So-called "non-bank lenders" that run storefront cash-for-title and payday lending operations gave the super PAC $437,500, according to the analysis.

Restore Our Future is by far the best-funded of the super PACs backing presidential candidates in the 2012 election. The super PAC closed out the month of February with $10.5 million cash on hand, more than Romney's campaign, according to FEC records.

Romney, a former private equity executive, wants to repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act and has said he is opposed to doing away with a tax loophole that has helped make private equity and hedge fund managers enormously wealthy over the years.

The finance industry's total percentage of contributions would be greater were it not for homebuilder and long-time Republican donor Bob Perry, who gave $3 million to the super PAC in February, bringing his total contributions to $4 million.

Romney has battled the perception that he is out of touch with working-class Americans. The list of donors to his super PAC isn't going to help much; the average contribution was a little more than $83,000.

High court changes the game

The 2010 Citizens United Supreme Court decision led to the creation of super PACs, which can accept unlimited donations from corporations, labor unions and wealthy individuals and use the funds to pay for advertising and other campaign expenses, as long as they do not coordinate with candidates.

Hedge funds are private, largely unregulated investment pools that are typically overseen by a single manager and usually available only to high-value investors, like wealthy individuals, private banks, pensions, corporate treasuries and endowments. Private equity companies are more hands-on but are also mostly unregulated and attract the same type of investor.

The firms and their trade associations share Romney's view that Dodd-Frank should be repealed. Investment managers also want to make sure "carried interest," which accounts for much of their income, as well as Romney's, continues to be taxed at the modest capital-gains rate of 15 percent.

Romney opposed changes in taxation of carried interest when he ran in 2007, although his current position is less clear.

Romney is the top choice of the securities and investment industry. His campaign has received $6.8 million with President Barack Obama a distant second at $2.3 million, according to the Center for Responsive Politics. The pro-Obama super PAC, Priorities USA Action, has collected $175,000 from the industry.

Wall Street investment bank Goldman Sachs' employees have given $670,000 to the super PAC. According to the Center for Responsive Politics, Goldman employees have given more than $535,000 to the Romney campaign itself -- the largest amount contributed by employees from any one company.

Neither the Romney campaign nor Restore Our Future responded to requests for comment for this story.

Top donors

Robertson is the founder of the now-defunct Tiger Management Corp. Now retired, he invests directly in other hedge funds, and has a network of "Tiger cubs" -- hedge fund managers he mentored while they cut their teeth at Tiger Management.

He is a generous philanthropist, pledging more than half his wealth in line with Bill Gates' and Warren Buffett's Giving Pledge, a charitable effort focused on earning the support of billionaires. He also funds more than 30 full scholarships for students at Duke University and the University of North Carolina at Chapel Hill, his alma mater.

Of more than $3 million in federal contributions Robertson has given since 1996, $2.9 million have gone to Republicans and Republican committees. Robertson could not be reached for comment for this article.

Among other seven-figure donors is Edward Conard, who originally made his $1 million donation under the name "W Spann LLC." Conard is a former managing director of Bain Capital -- the private equity company co-founded by Romney.

Current and former executives at Bain Capital and their families gave at least $3.1 million to Restore Our Future, including two households that contributed $1 million or more.

Conard came forward after numerous media outlets raised questions about the legitimacy of W Spann LLC. Conard could not be reached for comment.

Paul Singer, another $1 million donor, is the founder of Elliott Management, a hedge fund with $19 billion under management. Singer, whose net worth is estimated at $1 billion, made some of his fortune by purchasing debts owed by countries including Peru and the Republic of the Congo and suing them for payment.

Singer is a fiscal conservative and an outspoken critic of the Federal Reserve. But he's not afraid to disagree with the Republican Party's social conservatives. He also supports gay rights and was a key backer of the campaign to legalize gay marriage in New York.

A spokesman for Elliott Management who was familiar with Singer's giving would not comment on the donation.

John Paulson was an early million-dollar donor. He is founder of Paulson & Co., a hedge fund with $22 billion under management. He made $15 billion during the recession by short-selling subprime mortgages, according to multiple news reports. He also could not be reached for comment.

Robert Mercer, another $1 million donor, is president and CEO of Renaissance Technologies, a Manhattan-based hedge fund. Mercer, an NRA member and Long Island resident, earned $125 million in 2011, ranking him 16th among hedge fund managers, according to Forbes. He is a frequent contributor to Republican candidates and causes, notably donating more than $640,000 to Concerned Taxpayers of America.

Though he primarily donates to Republican candidates, including Rep. John Boehner, R-Ohio, and Sen. Pat Toomey, R-Pa., he has also given to Sen. Chuck Schumer, D-N.Y., and former Sen. Chris Dodd, D-Conn., among others. Mercer could not be reached for comment.

Legislative priorities

The Dodd-Frank financial reform act requires investment advisers who manage assets worth more than $150 million to register with the SEC. The firms must provide basic information about their organizational structure, individuals who fill key roles, the types of clients they advise and any conflicts of interest. With registration also comes the possibility of surprise inspections by the SEC.

Investment managers oppose portions of Dodd-Frank because it endangers their business model, said Lynn Stout, a corporate law professor at Cornell University. "Many people have doubts as to whether this sector of the economy is really socially beneficial," she said.

But the issue nearest to the heart and wallets of Romney's former colleagues is undoubtedly carried interest.

Hedge fund and private equity managers don't make money like most working people. They live off the profits generated from investments they manage. Those are considered "capital gains" and are taxed at a maximum rate of 15 percent. If that income were taxed the same as earnings, the rate could be as high as 35 percent.

The relatively obscure issue became big news when Mitt Romney, a beneficiary of the carried interest rule, released his tax returns, which showed he paid about a 14 percent tax rate for 2010 and 2011.

President Barack Obama's new corporate tax plan, unveiled Feb. 23, would treat carried interest as earned income. There are also proposals in both houses of Congress from brothers Sen. Carl Levin, D-Mich., and Rep. Sander Levin, D-Mich., to do the same.

Private equity groups, including Bain, and hedge funds, have lobbied to keep this change from happening. In 2011, the Managed Funds Association spent $4 million on lobbying, the Private Equity Growth Capital Council spent $2.2 million and the National Venture Capital Association spent $2.5 million.

Private Equity Growth Capital Council president Douglas Lowenstein described the proposed change in status as a "punitive 157 percent tax hike [that] will hurt those companies that are most desperately in need of capital to sustain or create jobs and drive growth."

Payday lenders for Romney?

Restore Our Future has also benefited from non-bank lenders that make payday loans, title loans and operate check cashing services. Dodd-Frank imposes federal regulatory oversight of these lenders.

"The payday lenders are under the full power of the CFPB (Consumer Financial Protection Bureau), just as are the big banks," said Ed Mierzwinski, consumer program director at U.S. PIRG. "And it's a very important power, so the payday lenders do not like the CFPB."

Rod Aycox, of Loan Max, and his title loan company Select Management Resources gave $200,000 to the super PAC. His company makes title loans, in which the borrower turns over his car title as collateral and receives a loan at a very high interest rate, usually based on the value of the car.

Las Vegas-based REBS Inc. donated $25,000 to Restore Our Future, listing an address in a shopping center in Las Vegas. State documents show REBS' president is James Marchesi, the founder and president of Check City, a chain of payday lenders, one of which has the same address as REBS in the Las Vegas shopping center.

Marchesi is also on the board of the Financial Service Centers of America (FiSCA), the national trade association for non-bank entities that provide financial services like payday loans, money transfers and check cashing. He could not be reached for comment.

Jones Management Services, run by Allan Jones, gave $35,000. He is also CEO of one of the country's largest payday lenders, Check into Cash Inc.

Payday loans, also known as payday advances, are short-term loans secured against the borrower's next paycheck. These loans often trap borrowers in a cycle of borrowing and high interest, which averages around 400 percent, according to the Center for Responsible Lending.

Other payday lenders that gave money to Restore Our Future are Community Choice Financial, ($30,000), QC Holdings ($25,000), Amscot Corp. ($10,000) and Express Financial Services ($2,500).

Another donor, RTTTA LLC, gave $75,000 and is linked to J. Todd Rawle. Rawle's company Softwise makes software for these lenders. Katsam LLC (spelled "Katsum" in filings), is linked to payday lender Moneytree founders Dennis and David Bassford and gave $35,000. The Bassfords could not be reached for comment.

FiSCA opposes further regulation of financial service centers on the grounds that it "could significantly reduce, if not eliminate altogether, Americans' access to small dollar credit and other financial products," according to its guide to the Dodd-Frank financial reform act.

Donors to Restore Our Future may be hoping for special treatment from a Romney presidency. But given that the candidate is largely with them on the issues already, that might not be the case -- they may just want him to win.

"They view him as far and away the candidate that's most likely to be sympathetic to be preserving business as usual in the financial sector," Stout, the Cornell professor, said. "They've been making a ton of profit and they don't want anyone to stop the party."

John Dunbar contributed to this report.

Article from Huffington Post

EU rule may drive out hedge funds

ridodirected@gmail.com (RIDO) — Sun, 01 Apr 2012 09:40:00 +0000

April 1, 2012 5:31 am
By Sophia Grene
Article from ft.com

Brussels appears to be returning to a harder line in its revision of AIFMD

New regulation could force hedge funds and the custodian banks that serve them out of the European Union.

A revised version of the Alternative Investment Fund Managers directive, seen by FTfm, includes provisions that could make hedge funds and private equity funds based in EU member states offer greater operational safeguards than retail investment funds.

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/43fea36a-7a5c-11e1-9c77-00144feab49a.html#ixzz1qmQYSIJ0

The banks that have custody of hedge funds’ assets are particularly affected, as they face being held liable for the safekeeping even of assets they do not hold directly.

This would push up the cost of the service to the point where some hedge funds could not afford it, and make it so onerous that some custodians might simply leave the market, say industry commentators.

“If the European authorities want depositories and want custodians, they can’t make it impossible to be in the business,” said Peter O’Dwyer, managing director at Dublin-based Trinity Fund Administration. EU regulation requires investment funds to use custodians.

Last week, the European Commission presented a revised text of the AIFMD to member states, giving them two weeks to respond to the 100-page document before it is submitted to the European Parliament for approval.

Early drafts of the AIFMD were seen as impossibly demanding in terms of the levels of operational security they proposed. Brussels and the alternative investment industry reached a compromise in the consultation stage, but the Commission now appears to be returning to the harder line of its earlier suggestions.

The revised text diverges from technical advice on implementing the AIFMD given by the European Securities and Markets Authority, and in others is more draconian than that agreed during consultation.

There is particular concern the rules for custodians may push some out of the business entirely. The revised directive says custodians should be responsible for the safekeeping of assets, even when delegated to a third party.

The definition of what is deemed to be held in custody is also controversial. Esma recommended that when official ownership of collateral is transferred to the collateral-taker, the assets should be deemed no longer held by the custodian, but the Commission’s text does not make this exemption.

Custodians would have a duty to monitor the status of such assets, possibly recalling them if the counterparty holding the collateral looked to be at risk of insolvency, or taking steps to ensure their safekeeping.

If the revised text is approved, jurisdictions such as Dublin and Luxembourg that have worked to attract alternative investment funds could suffer. Dublin has passed legislation to make it easier for offshore funds to come onshore.

This looked attractive to funds based in jurisdictions such as the Cayman Islands, because the AIFMD was expected to make it easier to sell European-domiciled funds across the EU. The revised version means funds that moved onshore may now reconsider that decision, as the costs of complying with the regulation will probably outweigh the benefits, say industry sources.

Delegating functions such as risk or investment management, standard practice among hedge funds working in one jurisdiction but regulated in another, may no longer be possible.

In addition, the relationship between European and third country regulators, while far from clear, looks unlikely to be an easy one.

Please don't cut articles from FT.com and redistribute by email or post to the web.

Article from ft.com

Large Hedge Funds Fared Well in 2011

ridodirected@gmail.com (RIDO) — Fri, 30 Mar 2012 07:31:00 +0000

MARCH 29, 2012, 11:00 PMHEDGE FUNDS
BY JULIE CRESWELL AND AZAM AHMED
Article from Deal Book New York Times

Hedge funds have endured a rough year. Tumultuous markets. Tighter regulations. An insider trading crackdown.

But despite the lackluster environment, the top managers still took home $14.4 billion in 2011.

Even when returns suffer, the largest hedge funds can collect big paychecks, thanks to the fees they charge pensions, endowments and wealthy individuals to manage money.

Paul Tudor Jones II charges a 4 percent management fee and takes 23 percent of any profit. So he made $175 million in 2011, although his main fund tracked the returns of the Standard & Poor’s 500-stock index. Steven A. Cohen, whose firm, SAC Capital Advisors, keeps 50 percent of the profit, earned $585 million.

“The industry’s fees and performance are so out of whack it’s unbelievable,” said Bradley H. Alford, who invested in hedge funds while he was at the Duke Endowment in the late 1990s but today oversees a lower cost mutual fund firm that competes with them. “Fifteen years ago, you got double-digit performance for those returns, but last year, the S.& P. was positive and hedge funds were negative. There’s no alignment with the fees.”

But the 10-figure payday is a rarer phenomenon. In 2010, six managers earned more than $1 billion, according to the annual ranking by AR Magazine, which tracks the hedge fund industry. John A. Paulson topped the list, taking home $5 billion.

Last year, only three managers hit the $1 billion mark. Ray Dalio, the enigmatic founder of Bridgewater Associates, seized the top spot, after his largest fund gained 16.05 percent last year. His payday: $3.9 billion.

In all, pay for the top 25 earners dropped by a third to the lowest level in three years. AR Magazine arrives at its figures by estimating money managers’ portions of fees along with the value of their personal stakes in the funds.

It all comes back to performance. In recent years, industry returns have been “uninspiring,” said Brad R. Balter at Balter Capital Management, as hedge fund strategies that have been “successful in the past aren’t working in these markets.”

The average hedge fund lost 5 percent in 2011, according to Hedge Fund Research Composite Index, which tracks nearly 2,000 portfolios. That compares with a 2 percent gain for S&P 500.

Strong returns account for the difference between a stratospheric payday and one that is just substantial.

Bridgewater’s gains — along with the firm’s hefty $120 billion in assets — catapulted two of Mr. Dalio’s lieutenants to this year’s top earners. Greg Jensen and Robert Prince each collected $425 million.

A relative newcomer, Chase Coleman, a protégé of hedge fund giant Julian Robertson, landed at No. 6 on the list, the magazine said. Mr. Coleman, 36, began his Tiger Global Fund in 2001, and earned $550 million last year, owing to bets on Internet companies like the Russian search engine Yandex. A spokeswoman for Tiger Global declined to comment.

Even longtime managers proved they can rack up big returns. The activist manager Carl C. Icahn, 76, was up 34.5 percent in 2011 and pocketed $2.5 billion.

“Some positions that we weren’t even in in the beginning of the year really paid off like El Paso and Chesapeake Energy,” Mr. Icahn said in an interview. “It was really fortuitous as we were really bearish and very hedged throughout the year.”

Some hedge fund managers on the list rebounded sharply after several years of weak performance.

The Renaissance Institutional Equities Fund was nearly shut down in 2009 after losing money for two consecutive years, the magazine said. Then the quantitative fund, which uses computer models to execute trades, came roaring back in 2011, gaining 34 percent.

A former chairman of Stony Brook University’s math department, James Simons, 73, handed over day-to-day duties to his co-chiefs, Peter Brown and Robert Mercer, in early 2010. But Mr. Simons’s personal stake in the Renaissance Fund put him at No. 3 on this year’s ranking with a payday of $2.1 billion. Mr. Brown and Mr. Mercer appeared lower on the list, each earning $125 million. A spokesman for Renaissance declined to comment.

The comeback award goes to Kenneth C. Griffin. The head of Chicago hedge fund Citadel landed at No. 4 on this year’s list after his two biggest funds nearly collapsed in 2008. It took three years for the funds to climb back to levels where they can charge their investors the lucrative performance fees. Last year the funds were up more than 20 percent, allowing Mr. Griffin to pocket $700 million, the magazine said. A spokeswoman for Citadel declined to comment.

Others barely held on to their spots after weak returns.

Paul Singer of Elliott Management, which oversees $19.2 billion, made $125 million last year even though his funds gained 3.8 percent to 4.2 percent. Seth Klarman of the Baupost Group made $110 million even as his oldest funds returned 4.75 percent to 5 percent, the magazine said.

Of the top 25 earners of 2010, 15 did not make this year’s list. Among them: Appaloosa’s David Tepper, whose Palomino fund fell 3.33 percent and Edward Lampert of ESL Partners, which plunged 12 percent on big losses from Sears Holdings. Mr. Tepper did not respond to requests for comment. A spokesman for ESL declined to comment.

Mr. Paulson — the $5 billion manager in 2010 — failed to make the list this time. One of his largest funds lost more than 50 percent, after bets on the economic recovery soured. A spokesman for Paulson declined to comment.

Article from Deal Book New York Times

Hedge Funds Aren't Buying Dividend Stocks

ridodirected@gmail.com (RIDO) — Tue, 27 Mar 2012 21:41:00 +0000

By Alexander Crawford, Kapitall

March 27, 2012

Article from The Motley Fool

It seems that the appeal of dividend income has been waning on smart money investors, including hedge fund managers.

In a total return framework, investors should view returns from price appreciation the same as returns from dividend income. However, when expectations for stock price movements change, so does the popularity of dividend income. That is, if investors expect big price increases in the stock market, they will be less likely to buy dividend-yielding names in favor of more growth-oriented ones.

We decided to take a look at the current popularity of S&P 500 dividend stocks among the smart money by comparing the number of those stocks seeing significant net purchases from institutional investors to those seeing significant net sales. The numbers were pretty decisive.

Out of the roughly 130 dividend stocks of the S&P 500 with dividend yields above 2% and sustainable payout ratios below 50%, only two saw significant net institutional purchases over the current quarter, whereas 14 saw significant net institutional sales. This could indicate a general aversion to dividend stocks from smart money investors.

Business section: Investing ideas

Below we list the S&P 500 dividend stocks seeing either strong net buying or net selling from institutional investors.

Do you think dividends are out of style? (Click here to access free, interactive tools to analyze these ideas.)

Institutional Buying:

1. BlackRock: Provides its services to institutional, intermediary, and individual investors. Dividend yield at 2.98%, payout ratio at 32.34%. Net institutional purchases in the current quarter at 12.0M shares, which represents about 7.31% of the company's float of 164.13M shares

2. M&T Bank (NYSE: MTB ) : Operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. Dividend yield at 3.26%, payout ratio at 44.80%. Net institutional purchases in the current quarter at 4.2M shares, which represents about 3.64% of the company's float of 115.37M shares.

Institutional Selling:

1. Amgen (Nasdaq: AMGN ) : Develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada. Dividend yield at 2.16%, payout ratio at 12.73%. Net institutional sales in the current quarter at -59.0M shares, which represents about 7.46% of the company's float of 790.53M shares

2. ConocoPhillips (NYSE: COP ) : Operates as an integrated energy company worldwide. Dividend yield at 3.45%, payout ratio at 29.05%. Net institutional sales in the current quarter at -47.1M shares, which represents about 3.68% of the company's float of 1.28B shares

3. Gannett: Operates as a media and marketing solutions company in the United States and internationally. Dividend yield at 5.15%, payout ratio at 12.47%. Net institutional sales in the current quarter at -7.6M shares, which represents about 3.24% of the company's float of 234.73M shares

4. Corning (NYSE: GLW ) : Manufactures and processes specialty glass and ceramics products worldwide. Dividend yield at 2.14%, payout ratio at 12.71%. Net institutional sales in the current quarter at -62.7M shares, which represents about 4.15% of the company's float of 1.51B shares

5. Harris: Operates as a communications and information technology company that serves government and commercial markets worldwide. Dividend yield at 3.00%, payout ratio at 24.02%. Net institutional sales in the current quarter at -3.7M shares, which represents about 3.27% of the company's float of 113.11M shares

6. The Interpublic Group of Companies: Provides advertising and marketing services worldwide. Dividend yield at 2.11%, payout ratio at 21.34%. Net institutional sales in the current quarter at -16.3M shares, which represents about 3.68% of the company's float of 442.45M shares

7. Kohl's: Operates department stores in the United States. Dividend yield at 2.66%, payout ratio at 23.41%. Net institutional sales in the current quarter at -7.1M shares, which represents about 3.16% of the company's float of 224.66M shares

8. Lexmark International: Develops, manufactures, and supplies printing and imaging solutions for offices. Dividend yield at 2.92%, payout ratio at 5.61%. Net institutional sales in the current quarter at -4.2M shares, which represents about 6.05% of the company's float of 69.45M shares

9. The McGraw-Hill Companies: Provides various information services for financial, educational, and business information markets worldwide. Dividend yield at 2.16%, payout ratio at 35.19%. Net institutional sales in the current quarter at -12.4M shares, which represents about 4.6% of the company's float of 269.64M shares

10. Northrop Grumman (NYSE: NOC ) : Provides products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors. Dividend yield at 3.30%, payout ratio at 26.03%. Net institutional sales in the current quarter at -13.2M shares, which represents about 5.67% of the company's float of 232.90M shares.

11. PPG Industries: Manufactures and supplies protective and decorative coatings. Dividend yield at 2.43%, payout ratio at 32.42%. Net institutional sales in the current quarter at -4.6M shares, which represents about 3.04% of the company's float of 151.25M shares.

12. Safeway: Operates as a food and drug retailer in North America. Dividend yield at 2.74%, payout ratio at 36.31%. Net institutional sales in the current quarter at -24.4M shares, which represents about 9.2% of the company's float of 265.28M shares.

13. The Travelers Companies: Provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. Dividend yield at 2.82%, payout ratio at 47.31%. Net institutional sales in the current quarter at -22.2M shares, which represents about 5.67% of the company's float of 391.38M shares.

14. Wyndham Worldwide: Provides various hospitality products and services to individual consumers and business customers in the United States and internationally. Dividend yield at 2.06%, payout ratio at 23.74%. Net institutional sales in the current quarter at -5.2M shares, which represents about 3.82% of the company's float of 136.12M shares.

Compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

Kapitall's Alexander Crawford does not own any of the shares mentioned above. Institutional data sourced from Fidelity.

The Steve Jobs Betrayal

You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Article from The Motley Fool

Hedge Funds Make Wrong-Way Bets for a Fourth Week: Commodities

ridodirected@gmail.com (RIDO) — Sun, 25 Mar 2012 20:45:00 +0000

By Joe Richter - Mar 26, 2012 4:00 AM GMT+0800
Article from Bloomberg

Hedge funds wagered the wrong way on commodity prices for a fourth consecutive week, boosting bullish holdings just before reports showing a contraction in manufacturing from China to Europe drove prices lower.

Money managers lifted combined net-long positions across 18 U.S. futures and options by 2.9 percent to 1.17 million contracts in the week ended March 20, Commodity Futures Trading Commission data show. The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped 1 percent last week, led by declines in lead and corn. Orange juice tumbled 11 percent, the most since August.

The S&P GSCI fell to a three-week low on March 22 after reports showed factory output in Germany and France unexpectedly shrank in March and a measure of China’s manufacturing was the weakest since November. U.S. government data the following day showed purchases of new homes unexpectedly fell last month, increasing investor concerns about the durability of the world’s largest economy.

“There are headwinds to growth right now, and therefore there are headwinds to commodities,” said Walter ‘Bucky’ Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama.

The MSCI All-Country World Index of shares fell 1.1 percent last week, with about $607 million erased from the value of global equities, according to data compiled by Bloomberg. The dollar retreated 0.6 percent against a basket of six major trading partners, and Treasuries returned 0.4 percent, a Bank of America Corp. index shows.

Corn, Coffee

Eighteen of the 24 raw materials tracked by S&P fell last week. Corn tumbled 3.9 percent, the most since mid-January, as improving U.S. weather boosted the outlook for crops. Arabica coffee declined to the lowest since October 2010 on March 22 on signs of expanding output from Brazil, the world’s top grower.

A preliminary reading in a Chinese purchasing managers’ index from HSBC Holdings Plc and Markit Economics dropped to 48.1 this month. Readings below 50 signal contraction. A gauge of euro-region manufacturing fell to 47.7 in March from 49 in February, Markit said March 22.

China’s steel output is slowing as the economy focuses more on consumers than large infrastructure projects, Ian Ashby, president of iron ore at BHP Billiton Ltd., the biggest mining company, said March 20. Rio Tinto Group, the second-biggest iron-ore exporter, also sees a slowdown in China, David Joyce, the London-based company’s managing director of expansion projects, told a conference in Perth, Australia the same day.

‘Petrified’ Speculators

“The general concern of a slowdown in China has petrified market speculators,” Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees more than $115 billion in assets. “A deceleration in demand from major economies like China will continue to be a thematic concern for investors.”

Forecasting moves in commodity markets has become more difficult as price swings have increased, said Peter Sorrentino, a fund manager who helps oversee $14.5 billion at Huntington Asset Advisors in Cincinnati. The 15-day historical volatility on the S&P GSCI was near the highest in two months last week, data compiled by Bloomberg show.

Demand for some raw materials may rebound as China’s government adds to stimulus measures to shore up growth, Morgan Stanley analysts led by New York-based Hussein Allidina said in a March 18 report.

China Lending

The People’s Bank of China lowered the requirement for reserves at large banks in February for the second time since November to spur lending. The nation decided last week to boost rural credit by cutting reserve ratios for more branches of Agricultural Bank of China Ltd., the nation’s third-biggest lender by market value.

While China’s growth will slow to 8.3 percent in 2012 from 9.2 percent last year, the expansion will rebound to 8.6 percent in 2013, according to the median of 19 economist estimates compiled by Bloomberg. Premier Wen Jiabao cut the country’s annual growth target to 7.5 percent earlier this month, the lowest since 2004. China is the world’s biggest energy user and consumes about 40 percent of its copper.

Sales of previously owned U.S. houses held in February near an almost two-year high, a report from the National Association of Realtors showed March 21. Two days later, the government reported that new home sales dropped in February for a second straight month, a sign that the housing recovery may be uneven.

Investment Flows

Investors pulled $127 million out of commodity funds in the week ended March 21, according to Cambridge, Massachusetts-based EPFR Global, which tracks investment flows.

Money managers boosted bets on a copper rally by 20 percent to the highest since August even as prices last week fell by the most in five weeks, the CFTC data show. Inventories monitored by the Shanghai Futures Exchange have more than doubled this year, signaling slowing Chinese demand. Lead dropped 5.4 percent to $1,995 a metric ton in London last week, the biggest decline since December. Corn tumbled 3.9 percent to $6.465 a bushel in Chicago, the most since mid-January.

TD Securities Inc. cut its 2012 price forecasts for most precious and industrial metals last week, citing “diminishing China growth expectations,” Bart Melek, the Toronto-based head of commodity strategy, said in a report March 23.

“With China deteriorating, Europe in recession and the U.S. recovery looking uncertain, the picture for commodities is bearish,” said Steve Mathews, the chief investment officer of Flintlock Capital Asset Management LLC in New York, which has $116 million in assets under management. “I don’t see a lot of impetus right now for commodities to go higher.”

To contact the reporter on this story: Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

Article from Bloomberg

Hedge funds regain momentum in Asia

ridodirected@gmail.com (RIDO) — Fri, 23 Mar 2012 21:31:00 +0000

By Linette Lim | Posted: 24 March 2012 0010 hrs

Article from Channel News Asia

SINGAPORE : Hedge funds have regained some momentum in Asia. They have attracted net fund inflows of about US$600 million since the start of the year.

This compared to outflows of US$2.7 billion seen in the last quarter of 2011, according to data compiled by industry tracker Eurekahedge.

A hedge fund employs advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets to maximise return on investment. It differs from mutual funds in that it is also open to a limited number of investors and requires a very large initial minimum investment.

However, despite the pick up in activity, analysts said hedge funds have lost their shine with investors.

Singapore-based hedge fund firm Asean Investment Management was bullish on Vietnamese stocks when it tumbled by about 50 per cent in 2011.

Their bets paid off when the market rebounded, gaining more than 20 per cent since the start of 2012.

The firm has since posted returns of about 25 per cent on its Vietnamese investments.

This is compared to its investment returns of 10 per cent in Thailand and 3 per cent for Indonesia.

David O'Neil, chief investment officer of Asean Investment Management, said: "So we have been deploying aggressively into Vietnam since December - which was at the bottom. We have around 55 per cent weighting at this point, and that is contributing massively to our performance. We have underweighted the expensive markets that we have made a lot of money on over the years like Thailand and Indonesia."

While some hedge funds are winning big, most others are languishing in losses.

More than 140 Asia-focused hedge funds shut down last year, due to the high market volatility which dampened investor sentiment.

Analysts said this is part of the natural cycle to weed out underperforming hedge funds.

Farhan Mumtaz, a hedge fund analyst at Eurekahedge, said: "Year-to-date Asian (hedge fund) launches are around 30...but the closure activity is keeping pace with that. Hedge funds have not performed that well - especially Asian hedge funds. They did not perform up to the mark in 2011, so they were already under pressure."

Overall, hedge funds have not regained their peak asset levels in 2007.

Hedge fund firms used to make 20 per cent in performance fee during those good times.

But Credit Suisse said that by the end 2011, 67 per cent of global hedge funds were performing below their peak levels and 13 per cent have not earned a performance fee for four years or more.

Analysts said investors have lost confidence in such investments in recent years.

Bernard Lee, CEO of HedgeSpa and research fellow at ITI @ SMU, said: "Over time, the overall performance of all these wonderful ideas looks more and more like a basket of index...Then why don't you invest directly into the index, why do you want to pay - in some cases - two layers of fees in order to get roughly the same performance?"

Hedge funds are now going into less crowded markets in Asia in search of higher returns.

For instance, Asean Investment Management predicts that Vietnam stocks will outperform other ASEAN markets over the next three years.

Meanwhile, Eurekahedge said it expects the number of launches to increase further.

This on the back of new US regulations such as the Volcker rule which will kick in around the middle of this year.

The Volcker rule is widely referred to as a ban on proprietary trading by commercial banks, whereby deposits are used to trade on the bank's personal accounts.

Analysts said this may result in proprietary trading desks of banks being spun off into standalone hedge funds.

Mr Farhan said: "We have seen that over the last year, a number of the star traders in the large investment banks or large trading houses have left those institutes and started up their own hedge funds, so we see that happening to a greater extent in 2012."

- CNA/ms

Article from Channel News Asia

Hedge fund wants four seats on Yahoo board

ridodirected@gmail.com (RIDO) — Thu, 22 Mar 2012 04:44:00 +0000

Article from USA Today

SAN FRANCISCO (AP) – A major Yahoo shareholder has launched a campaign to win four seats on the Internet company's board, setting the stage for a nasty battle that could drag on for months.

Hedge fund Third Point, which owns a 5.8% stake in Yahoo (YHOO), thinks the struggling company would do better if Third Point representatives were in the boardroom helping recently hired CEO Scott Thompson overhaul the operations. Thompson joined Yahoo's board in January after the company lured him away from eBay Inc.'s PayPal to become its CEO.

Third Point formally began its attempt to shake up Yahoo's board with a Wednesday regulatory filing that comes more than a month after the hedge fund announced it would revolt unless the company accepted its slate of candidates as directors. In a letter last week, Third Point CEO Daniel Loeb gave Thompson a final chance to avert a mutiny by allowing the hedge fund's candidates to join the company's board.

Yahoo now must grapple with a shareholder mutiny that will add to the turmoil surrounding the Sunnyvale, Calif.-based company, as Thompson mulls a dramatic reorganization that could bring a large number layoffs.

This marks the second time in four years that Yahoo has faced a boardroom challenge from a disgruntled shareholder. In 2008, billionaire Carl Icahn sought to overthrow Yahoo's board after the company balked at a chance to sell itself to Microsoft for $47.5 billion, or $33 per share. Icahn wound up accepting a truce that gave him and two of his hand-picked choices seats on Yahoo's board. Icahn and his allies are no longer on the board.

Third Point, based in New York, wants to use the botched Microsoft negotiations as an example of why Yahoo's board needs more expertise. The hedge fund opposes a Yahoo request to maintain a court seal on certain documents contained in a lawsuit filed by shareholders upset about how the Microsoft talks were handled. The Delaware Chancery Court case has already been settled, but Third Point still wants the opportunity to review some of the evidence that so far has been kept under wraps.

Third Point's proposed directors are Daniel Loeb, the hedge fund's manager; former NBC Universal CEO Jeff Zucker; former MTV Networks executive Michael Wolf and turnaround specialist Harry Wilson. In its filing, Third Point estimated it will spend about $8 million trying to get its nominees elected. The hedge fund already has invested about $1 billion during the past seven months to acquire its Yahoo holdings.

Yahoo's 11-member board already has changed. Four directors, including Chairman Roy Bostock, plan to step down at the company's annual meeting this year. The company appointed two directors, Alfred Amoroso and Maynard Webb, to its board last month and says it is still evaluating other candidates.

Unless a compromise is reached, the showdown between Yahoo and Third Point will be settled at the company's annual meeting. A date for the meeting hasn't been set yet, although Yahoo usually holds it in late June. When Icahn mounted his 2008 challenge, Yahoo postponed the meeting until August.

The upcoming departures from Yahoo's board are part of an attempt to placate shareholders frustrated with a long-running financial funk that has depressed the company's share price.

Yahoo shares rose 10 cents Wednesday to close at $15.51. The stock hasn't traded above $20 in the past 3½ years.

For more information about reprints & permissions, visit our FAQ's. To report corrections and clarifications, contact Standards Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.

Article from USA Today

Man Group Sees Hedge Fund Demand From Asia-Pacific Investors

ridodirected@gmail.com (RIDO) — Sat, 17 Mar 2012 20:04:00 +0000

By Bei Hu and Susan Li - Mar 16, 2012 11:23 AM GMT+0800

Article from Bloomberg

Man Group Plc (EMG), the world’s largest publicly traded hedge fund, is seeing demand for hedge funds from sovereign and institutional investors in the Asia-Pacific region, said Chief Executive Officer Peter Clarke.

“They are looking for a degree of capital protection,” Clarke said in an interview with Bloomberg Television in Hong Kong today. “They’re looking for liquidity in uncertain markets. And most of them have the requirements to continue to deploy assets in markets.”

About 37 percent of institutional investors in the Asia- Pacific region plan to increase allocations to hedge funds, helping expand the assets in the global industry, according to a February survey by Preqin Ltd., a London-based research firm, and the Global Absolute Return Congress, a meeting organizer.

The investors have retained interest in hedge funds even after 68 percent of them said hedge fund returns in 2011 failed to meet their expectations, according to the survey. Hedge funds globally lost on average 5 percent last year in the second-worst annual return since Chicago-based Hedge Fund Research Inc. started to track data in 1990.

More Risk Taking

Clarke said he also sees investors taking more risks, adding that equity long-short funds that bet on rising and falling stock prices will do well, he said. Credit and commodity-related strategies will also be appealing to investors, he added, without elaborating.

“This is the beginning of a significant shift from bonds into equities and other strategies,” he said.

Man Group’s assets under management rose 1.9 percent in the first two months this year to $59.5 billion, reversing last year’s decline, as investor redemptions slowed.

It raised about a quarter of its global assets from Asia as of September. In November, it appointed Li Yifei to head its Chinese office. Li worked for Viacom Inc. in China and was managing director of the entertainment company’s MTV Networks division in the country.

International hedge funds registered in Shanghai may be allowed to raise $5 billion in the Chinese currency for overseas investment, the country’s Caixin Online reported on March 1.

Europe Debt Crisis

Europe’s sovereign debt crisis led to investment losses, prompting investors to redeem from Man Group’s funds in search of safer assets last year. Analysts cut their estimates for Man Group’s 2012 earnings, concluding that the decline in assets and the investment performance of its largest hedge fund, AHL Diversified, would threaten fee revenues.

Clients withdrew a net $2.5 billion from Man Group’s funds in the fourth quarter amid concern that the European debt crisis would make it more difficult for money managers to make profits. Since the end of March 2011, assets managed by the firm have fallen 14 percent from $69.1 billion.

The company’s investment funds, which include hedge funds and the so-called long-only strategies that bet on rising asset prices, lost a net $1.5 billion in the fourth quarter.

AHL (MAHLDGB), a $21 billion program that uses computer algorithms to spot profitable trades in futures markets, climbed 2.5 percent this year through Feb. 27. Man Group bought GLG Partners LP in 2010 for $1.6 billion to expand business.

Man Group announced in January a plan to trim costs by 10 percent by cutting pay and jobs.

Adjusted pretax profit in the nine months through December was $262 million compared with $599 million in the 12 months through March 2011. Man Group has changed its year-end reporting period to December.

Man Group’s share price rose almost 14 percent this year.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net.

Article from Bloomberg

Hedge Funds Wary of Chinese Economic Slowdown

ridodirected@gmail.com (RIDO) — Wed, 14 Mar 2012 21:33:00 +0000

By Daneil Guttridge, Kapitall | More Articles

March 14, 2012

Article from The Motley Fools

Even with positive data being released for the U.S. economy and improving European sentiment, hedge funds have a bearish sentiment on commodities because of a possible Chinese economic slowdown. Bullish bets on commodity prices have been reduced for the first time in seven weeks, according to Whitney McFerron of Bloomberg. Since China is the leader in consumption of copper and energy, bets on those commodities have been reduced by the most since December.

McFerron also reports that the U.S. added 227,000 jobs in February, which counteracts the report that European economic growth has slowed. Manufacturing output for the euro region decreased more than analysts projected, according to Markit Economics. The increased investor confidence was also due to the announcement of a deal to burden private bond holders with the mass of Greek debt.

Pacific Investment Management Co.'s MihirWorah said, "The economy is looking better, and there's a general risk-on kind of sentiment. How do I think investor sentiment is? Certainly, they're voting with their money, and we're seeing steady inflows into our funds." After the 0.5% Chinese economic growth target reduction to 7.5% was released, commodity prices fell and then rebounded 2.1% for the next three days. This rebound could mean that the commodity prices are ready for a turnaround.

Business section: Investing ideas

We started this screen with a list of oil and gas companies, and we checked the short transactions on the stocks for covering, implying a bullish sentiment. Do you think these names will follow the commodity turnaround?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. Diamond Offshore Drilling (NYSE: DO ) : Operates as an offshore oil and gas drilling contractor worldwide. Market cap at $9.71B. Shares shorted have decreased from 10.44M to 9.57M over the last month, a decrease which represents about 1.26% of the company's float of 68.90M shares

2. Superior Energy Services: Provides specialized oilfield services and equipment to serve the production and drilling related needs of oil and gas companies. Market cap at $4.70B. Shares shorted have decreased from 23.15M to 8.53M over the last month, a decrease which represents about 9.44% of the company's float of 154.88M shares

3. Sunoco: Sunoco,, through its subsidiaries, refines and markets petroleum products, and manufactures chemicals in the United states. Market cap at $4.28B. Shares shorted have decreased from 6.74M to 5.13M over the last month, a decrease which represents about 1.51% of the company's float of 106.52M shares

4. Tesoro (NYSE: TSO ) : Engages in refining and marketing petroleum products in the United States. Market cap at $4.21B. Shares shorted have decreased from 13.82M to 12.04M over the last month, a decrease which represents about 1.3% of the company's float of 137.43M shares

5. Cheniere Energy Partners: Through its subsidiary, Sabine Pass LNG, L.P., owns and operates the Sabine Pass liquid natural gas (LNG) receiving terminal in western Cameron Parish, Louisiana on the Sabine Pass Channel. Market cap at $4.10B. Shares shorted have decreased from 676.02K to 446.82K over the last month, a decrease which represents about 1.23% of the company's float of 18.68M shares

6. Oasis Petroleum (NYSE: OAS ) : Engages in the acquisition and development of oil and natural gas resources primarily in the Williston Basin. Market cap at $2.90B. Shares shorted have decreased from 8.38M to 7.63M over the last month, a decrease which represents about 1.72% of the company's float of 43.70M shares

7. InterOil (NYSE: IOC ) : Engages in the exploration, appraisal, and development of crude oil and natural gas properties in Papua New Guinea. Market cap at $2.87B. Shares shorted have decreased from 8.40M to 7.82M over the last month, a decrease which represents about 1.72% of the company's float of 33.77M shares

8. Western Refining (NYSE: WNR ) : Operates as an independent crude oil refiner and marketer of refined products in Texas, Arizona, New Mexico, Utah, Colorado, and the Mid-Atlantic region. Market cap at $1.81B. Shares shorted have decreased from 14.35M to 13.54M over the last month, a decrease which represents about 1.51% of the company's float of 53.73M shares

9. Hornbeck Offshore Services: Operates offshore supply vessels (OSVs), multi-purpose support vessels, and a shore-base to provide logistics support and specialty services to the offshore oil and gas exploration and production industry primarily in the United States and Gulf of Mexico. Market cap at $1.48B. Shares shorted have decreased from 5.64M to 5.19M over the last month, a decrease which represents about 1.45% of the company's float of 31.14M shares

10. Northern Oil and Gas: Engages in the acquisition, exploration, development, and production of crude oil and natural gas properties in the Williston basin, the United States. Market cap at $1.45B. Shares shorted have decreased from 17.75M to 17.01M over the last month, a decrease which represents about 1.29% of the company's float of 57.34M shares.

Analyst ratings sourced from Zacks Investment Research.

Kapitall's Danny Guttridgedoes not own any of the shares mentioned above.

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Want To Invest In A Hedge Fund? Think Again

ridodirected@gmail.com (RIDO) — Mon, 12 Mar 2012 20:56:00 +0000

March 12, 2012 includes: IVV, MDY, RSP, SPY, VOO

Article from Seeking Alpha

Hedge Funds- the investment vehicle of the high net worth investor and uber-rich alike, with investments decisions determined by Wall Street wizards and super-computers. No wonder why the rich keep getting richer. Ahhh, the fantasy of being the "smart money".

Back in the real world, Wall Street wizards and super-computers are expensive. So are audits, administrative fees, taxes, accounting, compliance and legal advice. All of this is paid for by the investors in the hedge fund, in the form of management fees and performance fees.

Management fees in most hedge funds run between 1.5 - 2% of assets under management. Not bad, considering that a lot of financial advisors charge 1% as well. Performance fees typically run around 20%, but only on profits made during the year.

Consider the typical "2 and 20" hedge fund, so-named because of the 2% management fee, and a 20% performance fee. Imagine you invest $1M in such a fund, which gained 10% ($100K) over the course of the year. After deducting a management fee of 2% ($20K), and a performance fee of 20% (another $20K), you would be left with only a $60K gain, or a 6% ROI.

The conventional wisdom is that hedge funds "beat the market", justifying the exorbitant fees, and the investor in the hedge fund still makes-out better after the fees. After all, if hedge fund investors didn't beat the market, they would pull-out their money, and hedge funds wouldn't be a $2 Trillion industry. But reality and conventional wisdom don't always align.

Hedge Fund Research (HFRI) is a company that gathers data from thousands of hedge funds, categorizes and indexes the data, and reports on the performance of these funds. There are a number of companies that report similar data, but I chose HFRI because they also report 3-year and 5-year annualized returns.

The table below compares the performance of equity-based hedge funds with the performance of three funds that represent the S&P 500 index (SPY), the equal-weight S&P 500 index (RSP), and the S&P 400 mid-cap index (MDY), over 1-year, 3-year, and 5-year periods.

Overall, investors in equity-based hedge funds fared worse than investors that simply invested in index funds. Looking across the entire universe of hedge funds, the results are similar for non-equity focused hedge funds. The bottom-line is that most hedge funds don't beat the market, especially after fees.

Note: The hedge fund data in the table above is from HFRI. This data, as well as performance data on other types of hedge funds can be found on their website.

Disclosure: I am long RSP, MDY.

Article from Seeking Alpha

Blackstone tops hedge fund investor list

ridodirected@gmail.com (RIDO) — Sun, 11 Mar 2012 09:12:00 +0000

Article from Reuters

LONDON | Fri Mar 9, 2012 6:31am EST

(Reuters) - Blackstone was the largest fund of hedge funds last year ahead of banking groups HSBC and UBS, according to a survey which showed that the total assets managed by these types of investors failed to grow amid criticisms of high fees.

New York-based Blackstone Alternative Asset Management managed $39 billion (25 billion pounds) in hedge fund assets as of December 31, up 15 percent on the year, InvestHedge's Billion Dollar Fund of Hedge Fund Club survey said.

HSBC (HSBA.L) Alternative Investments ranked second, running around $28.5 billion, while UBS (UBSN.VX) Global Asset Management had almost $27 billion invested in hedge funds, growth of 16 percent on the previous year.

Fund of funds have watched their business shrink since the financial crisis - the industry managed $1 trillion in 2007.

Sharp hedge fund losses in the following years forced some to question the model, which charges clients an extra layer of fees - for trying to spot successful managers to invest in - on top of those charged by the underlying managers.

Institutional investors such as pension funds are now driving the growth in hedge fund assets, and more and more are investing directly with big-name managers like Brevan Howard and Winton Capital, rather than through fund of funds.

Fund of hedge funds with more than $1 billion under management held $622 billion in hedge fund assets at the end of last year, according to InvestHedge's survey - that is down on 2010's $625 billion, and represents close to a third of total hedge fund industry assets.

InvestHedge is part of Hedge Fund Intelligence, a news and data provider which tracks the industry.

Other big fund of funds to make the top ten again included Grosvenor Capital Management, Wall Street firms Goldman Sachs Asset Management and Morgan Stanley, and BlackRock Alternative Advisors, the InvestHedge survey said.

"Our latest figures show that there will always be a role for the good funds of hedge funds, despite the challenging market conditions of recent years," InvestHedge's Niki Natarajan said.

"Those with a large established infrastructure will be able to support the requirements of this trend, resulting in further mergers and acquisitions, such as the recent Union Bancaire Privée and Nexar Capital deal."

Mesirow Advanced Strategies also made it into the top ten last year, replacing France's Lyxor Asset Management.

(Reporting by Tommy Wilkes; Editing by Mark Potter)

Article from Reuters