Slow Your Judgments on Fast Trading (BloombergView)
In a recent pair of articles (part I, part II), hedge-fund magnate Cliff Asness defended high-frequency trading against most of the attacks that have been leveled against it. Asness is known for his strong opinions. And while I’m generally on his side in this case, a careful reading of his articles shows that he may have overstated his case and we shouldn’t be so quick to conclude that HFT is completely benign. A lot of people claim that HFT is legalized front running, allowing traders to improperly buy or sell ahead of customers. Asness defends HFT from this claim by narrowing the definition of front running; he insists that if you don’t trade on information that was entrusted to you, you aren’t really front running:..
IRS Backs Investors Seeking Change to Hedge Fund Fees (BusinessWeek)
The U.S. Internal Revenue Service issued a ruling that clears the way for institutional investors to seek changes to incentive fees assessed by hedge funds, which may make it cheaper for them to invest in such offerings. The ruling, 2014-18, clarifies that hedge funds can charge incentive fees cumulatively rather than annually without running afoul of a tax law change adopted in 2008. These fees, typically equaling 15 to 20 percent of an investor’s profits, comprise a big portion of a hedge fund manager’s annual revenue.
Gupta Asks Supreme Court to Allow Him to Remain Free During Appeal (WSJ)
Former Goldman Sachs Group, Inc. (NYSE:GS) director Rajat Gupta on Tuesday asked the Supreme Court to allow him to remain free on bail while he continues to challenge his 2012 insider-trading conviction. If the high court doesn’t continue Mr. Gupta’s bail, he will be required to report to prison June 17. Mr. Gupta, a former director at Goldman and The Procter & Gamble Company (NYSE:PG) +0.07%, was convicted on three securities-fraud counts and one count of conspiring to pass along inside info to Galleon Group hedge-fund founder Raj Rajaratnam. Mr. Gupta was sentenced to two years in prison. Mr. Rajaratnam is serving an 11-year prison sentence and has his own appeal pending at the Supreme Court.
World’s highest-paid hedge fund manager worth $10 billion ‘splits from his wife of 28 years’ (DailyMail)
The world’s highest-paid hedge fund manager – who is worth an estimated $10 billion – has split from his wife, friends have revealed. David Tepper, 56, and his wife, Marlene, 55, have not yet formally filed for divorce but have separated and are telling friends that the marriage ‘has run its course’, a source told PageSix. ‘They hope to settle things quickly, quietly and amicably,’ the source said. The head of $20 billion Appaloosa Management is worth an estimated $10 billion and made $3.5 billion in 2013 alone – meaning that divorce proceedings could reach eye-watering sums.
Lovell Minnick Partners acquires minority stake in 361 Capital (PIOnline)
Lovell Minnick Partners, a private equity firm, is taking a minority stake in hedge fund manager 361 Capital, said W. Bradford Armstrong, principal with Lovell Minnick Partners. Financial terms and the size of the stake are not being disclosed. “Lovell Minnick Partners’ interest in 361 Capital is based on a combination of an excellent management team and a significant opportunity in developing liquid alternatives products for registered investment advisers and other investors,” said Jeffrey Lovell, chairman of Lovell Minnick Partners.
Sen. Warren: Students should not be financing government (CNBC)
Pimco hires hedge fund manager in Europe (FT)
Geraldine Sundstrom, one of the most high-profile women in the European hedge fund industry, is set to join Pimco, the world’s biggest bond fund manager. Sundstrom, who left Brevan Howard Asset Management in February following a poor fund performance, will become a portfolio manager for Pimco and a member of the asset allocation team based in London. At Brevan Howard, Ms Sundstrom was based in Geneva and ran its roughly $2bn Emerging Markets Strategies Master Fund, which invested in interest rates, currencies and bonds.
Hedge funds’ allure pulls in $18.6 billion in new cash in April: data (Reuters)
The allure of hedge funds grew in April when investors added $18.6 billion in new money to these portfolios, according to a survey, even as their performance again lagged behind stock and bond markets’ returns. Investors sent nearly twice as much cash into hedge funds in April than in March when they added $10.6 billion, data from industry groups TrimTabs/BarclayHedge show. Multi-strategy hedge funds were the most popular, attracting $6 billion. Fixed income funds took in $5 billion and event-driven funds that bet on mergers, for example, saw $3.2 billion in inflows.
Finisterre adds co-portfolio manager for emerging markets debt hedge fund (PIOnline)
Kevin L. Bespolka joined emerging market specialist hedge fund manager Finisterre Capital as co-portfolio manager of the Finisterre Emerging Market Debt Fund. Mr. Bespolka is partnering with the UCITS fund’s existing portfolio manager, Christopher Watson, in this new position, part of the firm’s continued expansion, said Edward Jenkins, a Finisterre spokesman. Mr. Bespolka will focus on local markets, FX and rates “as a complement to Mr. Watson’s strong background in emerging market sovereign and corporate debt,” according to a company news release.
Jarkesy Suit Challenging SEC Hearing Thrown Out of Court (BusinessWeek)
George Jarkesy Jr., a Houston hedge-fund manager, lost his lawsuit that sought to block a U.S. Securities and Exchange Commission case in which he was accused of defrauding investors by steering bloated fees to the John Thomas Financial Inc. brokerage. Jarkesy and his investment fund management group Patriot28, formerly known as John Thomas Capital Management LLC, argued that they cannot get a fair hearing before the SEC in an administrative proceeding because the agency has prejudged him as a result of findings in a settlement with John Thomas Financial’s founder, Anastasios (Tommy) Belesis.
Long-Suffering CTAs Finally Post Gains in May (InstitutionalInvestorsAlpha)
Commodity trading advisers and other so-called quantitatively driven hedge funds – which use computer-driven systems to make investment decisions – posted very strong gains in May, pushing several of them into positive territory for the first time in recent memory. Most CTAs, trend followers and other computer-driven hedge funds have lost money in all or most of the previous four years. So the May gains are a big deal, especially if these firms can maintain their gains for the year.
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