The following day, a corporate broker from Firm X and Punch management had a 45-minute conference call with Einhorn, during which inside information was disclosed to him, the FSA said. Einhorn was told the sale would probably happen in about a week. Goldman Sachs Group Inc. (GS) and Merrill Lynch & Co. arranged the share sale, according to a filing at the time of the stock offering. The broker who briefed Einhorn was Merrill Lynch’s Andrew Osborne, a member of its corporate broking unit in London, according to two people with knowledge of the case. He has since left the firm, which is now part of Bank of America, said one of the people. Both people declined to be identified because the regulator hasn’t disclosed the broker’s identity.
Greenlight Capital Conference Call Full Transcript (Value Walk)
The FSA’s Statement on the Einhorn Fine (WSJ)
Here’s the FSA’s statement regarding its decision to fine David Einhorn: The Financial Services Authority (FSA) has decided to fine David Einhorn, owner of the prominent US hedge fund Greenlight Capital Inc (Greenlight), and his fund £7.2 million for engaging in market abuse in relation to an anticipated significant equity fundraising by Punch Taverns Plc (Punch) in June 2009.
FCC Handling of Falcone’s LightSquared Faces House Hearing (Bloomberg)
A U.S. House panel plans to examine the Federal Communications Commission’s handling of LightSquared Inc.’s proposed wireless service, which has been stymied amid arguments about interference with navigation gear. The high-speed wireless venture backed by hedge fund billionaire Philip Falcone won preliminary approval from the FCC a year ago. It remains without final clearance as the agency and other federal regulators weigh test results that show LightSquared disrupts global-positioning system equipment used on autos, tractors, boats and aircraft.
Analysis: Italy – A Buy for The Brave (Reuters)
Italy could turn out to be the investment bet of the decade if European Union leaders manage to contain the euro zone crisis. “That’s a fantastic yield, which is not going to stay up there the moment things settle down,” said Soros, once the world’s best-known hedge fund manager. “At 6 or 7 percent, Italian bonds are a speculation. At 5 percent or 4 percent I think they would be a very, very good long-term investment.”
Soros: Austerity Fomenting Europe Tensions (Market Watch)
Billionaire investor George Soros warned on Wednesday that the austerity Germany wants to impose on other euro-zone nations “will push Europe into a deflationary debt spiral.” Germans “have been traumatized by inflation and they don’t understand the threat that deflation can cause,” Soros told reporters at the annual meeting of the World Economic Forum in Davos. “There’s a shift in German thinking recognizing this isn’t working, but we’re quite far yet from abandoning this emphasis on inflation as the only threat to stability.”
The State of the Union: Small Firms Weigh In (WSJ)
President Obama’s State of the Union Address Tuesday night touched on deficit reduction, tax and regulatory reform, exporting, and other issues of interest to small business owners. But some entrepreneurs and small-business groups said that they believe the speech didn’t go far enough in citing specific solutions that can help spur growth and hiring, among other things. Mr. Obama touched on capital constraints but didn’t offer specifics on how to loosen credit for small firms. Mr. Marrow, who formerly worked in the hedge fund industry, said he was discouraged that the president opted instead to speak about the need for strict oversight in the financial sector because “that equates to less lending and liquidity,” he said. Mr. Marrow says he is a fiscally-conservative Independent who didn’t vote for Mr. Obama in 2008.
U.S. Banks Face Pressure on Margins from Fed Policy on Rates (Bloomberg)
Bank of America Corp (BAC) and Citigroup Inc. (C) are among lenders that may find it more difficult to boost profits and capital after the Federal Reserve pledged to keep its benchmark interest rate low until at least late 2014. Low interest rates also hurt custody banks by reducing the returns they make on investments and from lending cash and securities to institutional investors such as mutual funds and hedge funds. Bank of New York Mellon Corp. (BK), Boston-based State Street Corp. and Chicago-based Northern Trust Corp., the three largest independent custody banks, have made or planned 4,450 job cuts since November 2010.
In Fog of Warfare, A Message to Business (WSJ)
When their grandkids ask today’s CEOs, “What did you do in the Great Class War, Granddaddy?” it will be enough to be able to answer: “Well, sweetie, I didn’t get flattened.” Tuesday night’s State of the Union address offered much to business, but it also showed that companies will be something of a battleground across which the forces of 2012 populism—from the left and the right—will wage their campaigns, tank treads grinding, artillery pounding. It’s “class warfare,” says Daniel Loeb, founder of hedge fund Third Point, after the speech. He says he and his CEO counterparts are “sick and tired”…
Romney’s Fair Share (WSJ)
If Mitt Romney’s 2010 tax bill were merely his pretax income, he’d still be a member of the 1%—in other words, the government takes more of his wealth every year than 99% of Americans earn. But what the world really learned from the tax returns the GOP candidate released yesterday is that he is a walking argument for pro-growth tax reform. Democrats are dropping pianos on Mr. Romney because his Bain earnings under his retirement agreement are taxed at 15% as “carried interest” rather than next year’s 39.6% on ordinary salary. Carried interest is the accounting term for revenue in general partnerships—private equity and hedge funds, yes, but also certain real-estate and oil-and-gas outfits and others.
UPDATED: Warren Buffett and His Secretary Talk Taxes (Full Interview) (Value Walk)
Debbie Bosanek represents “average” income taxes paid in Buffett’s office. Warren Buffett and Debbie talk about taxes in this ABC interview.
UH Students Meet Warren Buffett, Take Tour Of Berkshire Hathaway (The Daily Cougar)
Twenty students from the Wolff Center for Entrepreneurship at Bauer were given the opportunity to meet famed investor Warren Buffett on Jan. 13 in Omaha, Neb. The students, who were chosen based on essays they had written about why they should be picked to go on the trip, met Buffett in person while touring the Berkshire Hathaway headquarters.
SEC Puts Private Equity under the Enforcement Microscope (WSJ)
The Securities and Exchange Commission has private equity squarely in its enforcement crosshairs. “I think that private equity law enforcement today is where hedge fund law enforcement was five or six years ago,” Robert Kaplan, co-chief of the asset management unit said Wednesday during the Private Equity Analyst Outlook conference in New York. In the past 12 months, the SEC’s enforcement division brought about 50 cases against hedge fund managers, Kaplan said.
Hedge Funds Down 2.52% In 2011, Says Dow Jones Credit Suisse Hedge Fund Index (Hedge Week)
Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished the fourth quarter up 0.71%, however, the overall performance for the year was down 2.52%, according to the Dow Jones Credit Suisse Hedge Fund Index 2011 Hedge Fund Market Review.
Nicholas Jarecki’s Movie (Reuters)
Lionsgate and Roadside Attractions have picked up “Arbitrage,” starring Richard Gere, Tim Roth, Susan Sarandon and last year’s Sundance star Brit Marling, for more than $2 million, TheWrap has confirmed. The companies beat out The Weinstein Company for the thriller. Nicholas Jarecki’s movie is about a troubled hedge fund manager who, desperate to sell his empire, makes an error that forces him to grapple with the law and his personal relationships.
Northern Trust Offers New Fund of Hedge Funds Reporting Platform (Market Watch)
Northern Trust has enhanced its offering to Fund of Hedge Funds (FoHF) clients with a new reporting platform which provides clients with better, more flexible access to key data elements. This, the latest in a series of enhancements, is available to Northern Trust’s FoHF clients worldwide, through its Hedge Fund Monitor product(TM).
Trader Gougenheim Eyes $50 Mln Glasnost Hedge Fund (Reuters)
Hedge fund industry veteran Philippe Gougenheim wants to raise $50 million-plus for a highly liquid global macro hedge fund he says can guard against the unpredictable influence of euro zone politicians on markets. Gougenheim, who was head of hedge funds at Swiss fund firm Unigestion, will launch the Cayman-domiciled Glasnost fund in June, named after the former USSR’s 1980s policy of openness and transparency.
Exclusive: HSBC to Set Up Buyout Advisory Group (Reuters)
HSBC (HSBA) is setting up an advisory arm to help leading buyout firms raise new money for deals and has brought in a senior banker from investment bank Greenhill (GHL) to lead the group, people familiar with the situation said. HSBC has hired Christopher Cooke from Greenhill to lead the new fundraising group in London and is looking to hire more staff, three people said. Cooke joined Greenhill in 2008 as a managing director of its fund placement group, having previously been a member of the fundraising and investor relations team at hedge fund CQS.
Arbess Says Greece to Bury Investors (Bloomberg)
Daniel Arbess, a partner at Perella Weinberg Partners LP, says because of a” forced restructuring” Greece” is going to bury hedge funds … bury hedge funds …
Vale Charged $5.6 Billion in Unpaid Taxes in Brazil, Will Appeal Decision (Bloomberg)
Vale SA (VALE), the world’s biggest iron- ore producer, said Brazil delivered “unfavorable rulings” on 9.8 billion reais ($5.6 billion) in unpaid taxes. “With its current cash generation, it wouldn’t be such a problem for Vale” to pay at least part of the disputed amount, said Leonardo Brito, an equity analyst at hedge fund Teorica Investimentos in Rio. “It will still take time before a final ruling as the company will appeal,” he said by telephone today.
Jain Says Banks Haven’t Seen ‘Significant’ Employee Talent Loss (Bloomberg)
Deutsche Bank AG (DBK)’s Anshu Jain, who is taking over as co-chief executive officer at the end of May, said the firm and its competitors haven’t seen a “significant” loss in skilled employees amid restrictions on pay. Financial services industry employees focused on “short- term” compensation may find work at hedge funds or in so-called shadow banking, where they won’t face restrictions that the banking sector is imposing “for good reasons,” Jain said.
Turkish Lira Advances to 2 1/2-Month High, Bonds Rally on Fed Rate Outlook (Bloomberg)
The lira gained to its strongest level in two-and half-months and bonds rallied after Federal Reserve Chairman Ben S. Bernanke signaled plans to maintain near-zero interest rates through 2014, easing concern on the funding of Turkey’s current-account deficit. “The rates dynamic has improved in overall,” Bugra Bilgi, a hedge fund manager at Garanti Asset Management in Istanbul said, in e-mailed comments. “The current account deficit will be easily financed in this environment and rates look too cheap.”
Accused Inside Traders Kuo, Newman Released on Bond in N.Y.
Danny Kuo and Todd Newman, two of seven men accused of taking part in a “criminal club” of hedge fund traders and analysts who swapped illegal secrets involving Dell Inc. (DELL), were allowed to remain free on bond.
Gold Proves Safest as Goldman Forecasts Record: Riskless Return (Bloomberg)
Gold provided the best returns of all commodities in the past five years when adjusted for volatility, and Goldman Sachs Group Inc. says the rally will continue as options traders signal no change in the metal’s relatively low risk. Bullion, which has seen 11 years of gains as investors sought a haven amid two bear markets in stocks and a sovereign debt crisis, also posted the safest return in the past 12 months, even as it fell from a record high to a five-month low in the second half of last year and gold investors led by John Paulson suffered losses. Goldman Sachs forecasts gold will reach a record this year, and a gauge of future price swings is near a five-month low.
WaMu Bankruptcy Judge Agrees to Drop Insider-Trading Ruling (Bloomberg)
The judge overseeing Washington Mutual Inc. (WM)’s bankruptcy agreed to drop a ruling that hedge funds may have engaged in insider trading. U.S. Bankruptcy Judge Mary Walrath in Wilmington, Delaware, found in September that there was enough evidence of insider trading to allow a lawsuit to be filed against four hedge funds that hold billions of dollars of WaMu’s debt.
EMI Music Said to Set Lender Meeting on $1.8 Billion in Loans (Bloomberg)
EMI Music Publishing set a lender meeting for Jan. 27 at 10 a.m. in New York to discuss $1.8 billion of loans to support its acquisition by Sony Corp. (SNE), according to a person with knowledge of the matter. A term loan B is sold mainly to non-bank lenders such as collateralized loan obligations, bank loan mutual funds and hedge funds. In a revolving credit facility, money can be borrowed again once it’s repaid; in a term loan, it can’t.
Eton Park vet Lucas gears up for Portland Hill launch (Hedge Fund Intelligence)
Former Eton Park and Goldman Sachs man Thierry Lucas is gearing up to launch his own London-based event-driven and long/short equity operation called Portland Hill Capital.
Study shows that hedge funds regularly break with conventional wisdom about performance (Opalesoue)
New quantitative research shows that emerging managers in hedge funds regularly break with conventional wisdom about performance. Peter Urbani breaks down the pivotal findings in Opalesque New Managers – a new monthly publication focused on emerging managers (whose firm is less than 48-month old and started with under $60m in AuM) . According to the study, hedge funds’ return distributions are not normal twice as often as those of long-only funds. On the whole, returns are higher and drawdowns are lower across indices. Individual funds’ return distributions can differ from normal at least 25% of the time, Urbani notes.
Ex-Valhalla Forex Trader Goes It Alone (FINalternatives)
Valhalla Capital veteran Stephen Hart is back with a new hedge fund firm and a maiden foreign exchange and commodities trading adviser offering.
Covenant Financial Services Becomes Covenant Global Investors (FINalternatives)
Covenant Financial Services, the management company for the Covenant family of target-return, global macro hedge funds and separately managed accounts, has changed its trade name to Covenant Global Investors. The firm said in a statement the change was made to “better reflect the firm’s current position in the market and the completion of its evolution from a boutique advisory firm started in 1984 to the $320 million AUM global macro investment manager that it is today.”
Kleinberg Kaplan Adds 2 New Members (FINalternatives)
New York-based law firm Kleinberg, Kaplan, Wolff & Cohen has named Kelly E. Zelezen and Euchung Ung members of the firm, effective January 1, 2012. Zelezen joined the firm in 2006 and concentrates her practice on the asset management industry, where she advises managers of hedge funds, private equity funds and separately managed accounts. She counsels private investment funds on all aspects of their formation and ongoing operations and her practice also includes compliance matters.
Trinity Fund Administration Opens New York Office (FINalternatives)
Trinity Fund Administration, servicing an estimated $2.1 billion in hedge fund assets, has opened an office in New York. The new office will be “primarily a local contact point enabling the firm to better facilitate its North American clients and business partners,” the boutique hedge fund solutions company said in a statement.
36 South’s Black Swan Shines In ’11 (FINalternatives)
A volatile 2011 proved handsomely profitable for 36 South Capital Advisors. The London-based firm’s tail risk fund, Black Orlov, soared 101% last year. Then again, such returns are nothing new for 36 South, whose previous black swan fund, shuttered in 2009, returned 234% during the economic crisis in 2008
Judge: Hedge Fund Likely To Win In Lawsuit Against Commerz (FINalternatives)
Commerzbank is poised to lose its second battle over profit certificates with an alternative investments firm. A Frankfurt appeals court indicated that Eurohypo, which Commerz bought in 2007, isn’t likely to win its appeal of a lower court ruling that found Commerz on the hook for profit certificates it stopped payment on in 2009. That’s good news for hedge fund QVT Financial, which sued the bank and is now likely to win on certificates originally issued by Hypothekenbank in Essen, but also on certificates originally issued by Rheinische Hypothekenbank.
Capula Co-President Mifsud Quits (FINalternatives)
Fast-growing Capula Investment Management is out a co-president. After less than a year at the firm, Glen Mifsud resigned for personal reasons, Financial News reports. Mifsud’s role will be filled by David Gu, who, like Mifsud, joined Capula last year. He remains co-chief investment officer, focusing on planning new funds and recruiting investment staff.
CalPERS Loses 2.3% On Hedge Funds, Gains 12.4% On Private Equity (FINalternatives)
The California Public Employees’ Retirement System managed to make money last year—no thanks to its hedge fund investments. The nation’s largest public pension fund lost 2.29% on hedge funds, Joseph Dear, chief investment officer, told the CalPERS board. Despite the loss, CalPERS managed a 1.1% return for 2011, a year that saw the Standard & Poor’s 500 Index finish flat.
China Investor Hires Hedgie CEO (FINalternatives)
Seeking a leader, Rotoblock Corp., has turned to the hedge fund industry. The California company, which invests in emerging technology opportunities in China, named Andrew Schneider CEO. Schneider last year founded Global Hedge Fund Advisors, after stops at HedgeCo Networks, Morgan Stanley and Prudential Securities.
Tepper To Seed Protégé’s Incline Hedge Fund (FINalternatives)
A former partner at Appaloosa Management has founded his own hedge fund shop, backed by Appaloosa founder David Tepper.
Guggenheim Global Trading Launches Operations With $250M (FINalternatives)
Guggenheim Partners’ multi-strategy hedge fund, Guggenheim Global Trading, has launched operations with $250 million of the $500 million pledged by the parent company. GGT took on its first third-party investor on Jan. 16, it said in a Securities and Exchange Commission filing. It now boasts three such investors, and plans to continue offering the vehicle for at least a year.
Carlyle Promotions Focus On Non-Buyout Businesses (FINalternatives)
The Carlyle Group announced its annual promotions to managing director and director. Forty-one people got the nod—but only 10 of them work in the $148 billion firm’s buyout division. The rest work in real estate, mezzanine funds and investor relations, among other business areas.
Stanford Trial Begins (FINalternatives)
Accused hedge fund fraudster R. Allen Stanford pleaded not guilty to running a $7 billion Ponzi scheme at the beginning of his long-delayed trial in Houston yesterday. Stanford said he was not guilty of “every count”—14 of them, including conspiracy, mail fraud, wire fraud and obstruction of a Securities and Exchange Commission investigation. Prosecutors then launched into their opening statements, calling the defendant a liar, over and over again.
Bank Of America: The Turnaround Challenge Of The Century (CNN Money)
Bank of America can’t just cut its way to profitability; it needs to grow its revenues too. This is where things get a bit hairy. New regulations have cost the firm billions in revenue, which will never return. The Durbin Amendment, which reduces the bank’s take from debit card transaction, is costing it $500 million a quarter in lost revenue. The Volcker Rule, which bars depository banks from engaging in proprietary trading and limits investments in hedge funds and private equity ventures, is slated to cost the bank a large sum of cash in the coming years.
John Gapper: Money Shovers Can Live Without Tax Perks (Financial Times)
For the world’s financial elite, now might be a good time to be on a Swiss mountainside, protected by a cordon of armed police, and able to take one’s mind off things by skiing and popping into a private bank, the FT columnist says. I’d say it was an awkward time to be a hedge fund or private equity manager. They have mountain-top problems, however, which aren’t really problems at all compared with being unemployed or – heaven forbid – paying standard income tax.
Income Disparity Tops List of Concerns (Financial Times)
As the world’s leading business people, bankers and politicians entered the concrete Congress Centre of the World Economic Forum in Davos, they were assailed by a cacophony of clanging tin pots. Some local Swiss were protesting, with signs saying: “Wir sind die 99%!”
UK Regulatory Changes Most Pressing Concern For Managers, According To IMS Survey (COO Connect)
UK regulatory changes are a more pressing concern for hedge funds than the European Union’s (EU) Alternative Investment Fund Managers Directive (AIFMD), a survey by The IMS Group has found. Several key aspects of AIFMD are still undecided at the European level. Some 31% of managers expressed uncertainty about what AIFMD will look like. “The European Securities and Markets Authority (ESMA) still has a lot to do with clarifying AIFMD. Hedge funds are unsure of what to expect so I suspect some have not got AIFMD at the front of their minds yet,” said Peter Moore, head of regulatory compliance consulting at IMS.
Hedge Funds Warned On Sub-Custody Risk In Struggling Eurozone States (COO Connect)
Hedge funds, which have assets held at sub-custodians in one or more of the PIIGS (Portugal, Italy, Ireland, Greece, Spain) have been advised to perform greater operational due diligence on their agent banks in the event of a sovereign default. A majority of market commentators are bracing themselves for a Greek default with some speculating the embattled country will leave the eurozone altogether. Some extreme bears even argued a Greek default will take down several weaker economies including Portugal, Italy and Spain.
Money Shovers Can Live Without Tax Perks (Financial Times)
Opening Bell: 01.26.12 (Deal Breaker)
10 Thursday AM Reads (The Big Picture)
Morning News: January 26, 2012 (Crossing Wall Street)
Bollore Group, A Fine French Bordeaux For Your Financial Collection (Reuters Hedge World)
CFTC Report On Futures Firms Audits, Red Light For Greenlight, Emerging Market ‘Risk Bombs’ And More (Reuters Hedge World)
