The Activist and Herbalife: Just Maybe Ackman’s Right (The New York Times)
Bill Ackman, the activist investor, has been painted as a loser in his yearslong quest to shut down Herbalife, the nutritional supplement company that he bet against, contending it defrauded customers and was a pyramid scheme. Two weeks ago, Herbalife paid $200 million to settle a case brought by the Federal Trade Commission. Herbalife’s stock rose after the settlement, which showed that investors took the development as little more than a slap on the wrist. On Wall Street, Mr. Ackman’s rivals snickered. The headlines have been withering: “Herbalife Settles Pyramid Scheme Case With Regulator, in Blow to Pershing’s Ackman,” Reuters wrote. “Herbalife Scores Huge Victory in Its Bill Ackman Battle With F.T.C. Settlement,” Forbes said. And on and on.
Einhorn Insurer Shifts to Mortgage Bet After Florida Fraud Costs (Bloomberg)
David Einhorn’s Greenlight Capital Re Ltd., the reinsurer seeking to reverse underwriting losses, is pushing into the mortgage-guaranty market after being burned by fraudulent claims on property policies in Florida. Greenlight Re has been struggling to find profitable insurance underwriting opportunities after Einhorn formed the company partly as vehicle to generate capital that he can invest through his hedge fund strategies. The Cayman Islands-based firm declined the most since October in New York trading Tuesday after posting its fifth quarterly loss in six periods. The reinsurer is exiting money-losing forays into construction-defect coverage and commercial-vehicle policies while scaling back in Florida.
Och-Ziff Doubles Reserve to $414 Million to Settle Probe (Bloomberg)
Och-Ziff Capital Management Group LLC, the hedge fund firm run by Daniel Och, more than doubled the money it’s setting aside for a settlement with U.S. authorities and is in talks to raise capital from partners to help cover the cost. Shares rallied. The firm reserved $214.3 million for the probe in the second quarter, bringing the total for the anticipated settlement to $414.3 million, the company said Tuesday in a statement. Chief Financial Officer Joel Frank said on a conference call today that settlement talks with the government are in advanced stages. The company founded by Och, 55, has been in the cross hairs of investigators for at least five years over whether it knowingly paid bribes to get an investment from Libya’s sovereign wealth fund and to participate in deals elsewhere in Africa.
Activist Hedge Fund Marcato Gains 10.4 Percent In July (Reuters)
Marcato International, an activist hedge fund that mainly bets on U.S. equities, returned 10.4 percent in July, handily beating the broader stock market index’s gain, when the fund made two new investments. July’s gain helped shrink the fund’s losses for the year, leaving it down 2.7 percent through the end of July, according to a shareholder update sent to investors in the $1.5 billion fund firm and seen by Reuters on Tuesday. The Standard & Poor’s 500 index climbed 3.7 percent in July and is up 7.7 percent for the year. Marcato last week said that it now owns 5.1 percent stakes in crane and heavy equipment manufacturer Terex Corp. and restaurant chain Buffalo Wild Wings Inc, sending the share price of both companies higher.
Hedge Funds Invest In Emerging Markets In Record Numbers (CNBC)
Hedge funds needed a profitable trade, and they just may have found it. Managers in the nearly $3 trillion industry love emerging markets, a group that had been lagging well behind other areas but recently has shown strong returns. The sector pulled in $1.2 billion in net long positions over the past month, according to Bank of America Merrill Lynch. That put total net longs to $15 billion for asset managers, the most bullish position going back to at least October 2009, which is as far back as BofAML records go. That rush of institutional cash comes at a time when emerging markets are on the comeback trail. Slumping commodity prices and fears of a slowdown in China had been hampering EM investment, but that has changed.
Bloomberg BRIEF: Hedge Fund Maps Out US Elctions (Audio) (Bloomberg)
John Tucker spoke with Hema Parmar, a Journalist of Bloomberg Editorial to preview the Bloomberg Hedge Fund Brief that comes out at 11AM Wall Street time. Highland Capital Management, a $17 billion hedge fund, is strategizing around the U.S. election by identifying sectors that they think are winners and losers depending on who wins the presidency.
AIG, MetLife Report Earnings as Big Changes Loom (The Wall Street Journal)
Some big insurers may be about to give some hints about some big changes they have in store. American International Group and MetLife post second-quarter earnings this week, with results that investors will scrutinize for signs of how the two giant insurers are morphing to deliver better returns. After the close of trading Tuesday, AIG will report its first full quarter of results since an update on Jan. 26 of strategic priorities, back when activist investors were clamoring for a three-way split of the company. In May, AIG added to its board a representative of billionaire activist Carl Icahn and hedge-fund manager John Paulson, aiming to win support for a slower-paced overhaul.
