The cost of investing in alternative assets is falling—slowly (Economist)
PHOENICIAN merchants kept a fifth of the profits generated from their seafaring adventures and paid out the rest to their financiers. So claimed Alfred Winslow Jones, the manager of the first modern hedge fund, who in the 1950s used the (perhaps apocryphal) precedent to finagle a 20% cut from his backers. Other managers subsequently added a 2% annual charge on the assets they invested to arrive at the “2 and 20” formula that became the standard for both hedge funds and private equity. Investors, who have long suspected that this arrangement enriches managers faster than their clients, are belatedly fighting back. They have succeeded in amending the formula to something more like “1.4 and 17”, at least for newcomers to the business (see chart).
Raimondo’s Money Moves Criticized By Wall Street Journal (RIPR)
The hedge fund Third Point LLC offered a 25 percent return to Rhode Island’s pension fund over the last year. That’s far better than the 14 percent earned by the pension fund as a whole. Yet the state Investment Commission, which is chaired by Raimondo, voted last week to divest its holdings in Third Point. In an editorial, The Wall Street Journal says the move amounts to a buckling under by Raimondo due to pressure from a teachers’ union. The editorial points to how the American Federation of Teachers opposes charter schools, and how the hedge fund’s owner is a big charter school supporter. Raimondo’s spokeswoman, Joy Fox, says the move was routine, to reduce risk in the pension fund’s hedge fund allocation.
Federal-Mogul replaces co-CEO with Icahn executive (AutoNews)
Federal-Mogul Corp (NASDAQ:FDML) said one of its co-CEOs is stepping down to be replaced by a board member and executive affiliated with its controller shareholder — longtime Wall Street player Carl Icahn. The diversified powertrain and spare parts supplier named Icahn executive Daniel Ninivaggi to co-CEO and CEO of its aftermarket group. He replaces Kevin Freeland in the position; Freeland is leaving the company for personal reasons, the company said in a statement. Freeland was hired in the role in May. Ninivaggi is the third executive in the position in less than two years. Rainer Jueckstock continues as the other co-CEO.
Hedge funds down in January… Global ETFs overtake hedge funds… (HedgeWeek)
Hedge funds fell 0.24 per cent to open 2014 – but not as much as the broader markets. The average hedge fund shed 0.24 per cent in January, according to Hedge Fund Research’s HFRX Global Hedge Fund Index. But the benchmark managed something it rarely accomplished last year: besting the Standard & Poor’s 500 Index, which fell more than 3 per cent last month. Despite the overall decline, most strategies tracked by the HFRX suite were in the black in January, led by master-limited partnerships—last year’s best-performing strategy at 26.35 per cent which returned 1.58 per cent. Distressed restructuring funds gained 1.08 per cent, equity-market neutral funds 0.72 per cent, convertible arbitrage funds 0.64 per cent, credit funds 0.6 per cent, event-driven funds 0.39 per cent, fundamental growth funds 0.36 per cent, systematic diversified commodity trading advisers 0.2 per cent, special situations funds 0.17 per cent and merger arbitrage funds 0.09 per cent.
New Wall Street Exposé Details Life as a Lowly Analyst (InstitutionalInvestorsAlpha)
The average 21-year-old is more adept at beer pong than at deciding his future. So it shouldn’t be surprising that a great many recent college graduates pursue jobs in banking, lured by not just outsize salaries but also an initial commitment of only two years. That, at least, is the view of New York magazine business writer Kevin Roose in his latest book. In Young Money: Inside the Hidden World of Wall Street’s Post-Crash Recruits (Grand Central Publishing; $27), Roose intertwines himself into the not-so-happy lives of eight first-year banking analysts.
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