…to address the main flaws it sees in the traditional fund-of-funds model, including high fees, close correlation with equity and credit markets, over-diversification, an assets and liabilities mismatch and a lack of transparency and risk monitoring.
Boutique primes enable new generation of entrepreneurial hedge fund managers (Opalesque)
Small has proved beautiful for hedge funds struggling to find returns over recent periods of unpredictable markets. Analytics firm PerTrac recently reported that funds with less than $100m in assets have outperformed much larger funds in 13 out of the last 16 years. But starting small and getting any support from key service providers such as prime brokers is increasingly challenging as the banks themselves struggle with squeezed profit margins. The high barriers to entry for fledgling funds from large banks have created a new phenomenon, boutique primes. In an interview with Opalesque, Kevin M. LoPrimo, MD, Global Head of Hedge Fund Services at Global Prime Partners (GPP) explains: “We don’t do anything that the big firms can’t do, but we do it for smaller managers.”
Billionaire Dan Loeb’s Top Stock Picks Include American International Group Inc (AIG) (Insider Monkey)
Third Point, an activist and value hedge fund managed by billionaire Dan Loeb, filed its 13F with the SEC in mid May. While Loeb and his team cut their stake in American International Group Inc (NYSE:AIG) they still owned 13.5 million shares at the beginning of April. Apple Inc. (NASDAQ:AAPL) regained its place as the most popular stock among hedge funds during Q1, with AIG dropping to third place (find more of hedge funds’ favorite stocks). The stock still trades at a considerable discount to the book value of its equity, with a P/B ratio of 0.7. We think that this is in part because large institutional investors such as mutual funds continue to avoid the bailed-out insurer, potentially creating a value opportunity.
Steve Cohen’s SAC Capital About to Lose Blackstone (Wall St. Cheat Sheet)
When subpoenas keep coming for a hedge fund’s executives and investors learn the company is definitely not cooperating with investigators, it’s likely to cause a run for the exits. The Blackstone Group L.P. (NYSE:BX) is following this path with SAC Capital as the hedge fund faces mounting legal pressure and Steve Cohen may be forced to plead the Fifth in a Manhattan court. Blackstone’s $550 million investment represents the largest chunk of outside money in SAC Capital, which manages $15 billion of assets, about $9 billion of which belong to Cohen himself. If Blackstone removes the majority of its investment from the fund, as Reuters is reporting, more investors are likely to follow. According to The New York Times, SAC Capital has several controls in place that restrict the options for investors when exiting the fund.
Family offices most exposed to hedge funds, PE (Asian Investor)
Family offices have the biggest portfolio exposures to hedge funds and private equity on a global basis, indicates a new Preqin report. On average, family offices have 24.5% of their portfolio assets allocated to PE and 19.1% to hedge funds. Endowments have the second biggest exposures, of 12.9% to PE and 18.8% to funds, says the 2013 Preqin Investor Network Global Alternatives Report. Insurance firms have the smallest allocations, with 2.6% allocated to PE and 2.4% to hedge funds. In terms of capital inflows, public and private pension funds are the largest PE allocators, accounting for 43% of capital invested by private equity funds during 2001-2011. By comparison, foundations and endowments collectively comprise 19% of total PE capital invested during the same period.
