Hedge Funds May Rebound and Spoil Buffett’s Bet (WSJ)
Timing isn’t everything, but it sure helps. Six years ago, Warren Buffett, chairman of Berkshire Hathaway Inc. (NYSE:BRK.B) +1.48% made a $1 million bet with hedge-fund manager Protégé Partners that a simple stock-index fund would beat their handpicked stable of five funds of hedge funds over a decade. Then 2008 happened and the funds, though they declined, lived up to their names and trounced the market. Having reached the halfway point at the end of 2012, though, Mr. Buffett had a substantial lead, with a total return of 8.69% to just 0.13% for the masters of the universe. That looks set to widen further in 2013: Through November, a weighted index maintained by Hedge Fund Research Inc. was up by just 8.31% compared with nearly 29% for the S&P 500.
Managers turn to mind over money for profits (eFinancialNews)
Against this backdrop, managers are exploring a new frontier: behavioural finance. They are becoming introspective, attempting to get into the minds and psyches of the traders and key decision makers who generate their profits. Buoyed by the greater acceptance of social, cognitive and emotional factors in the study of financial markets in the aftermath of the financial crisis, and boosted by cheap and efficient ways of harvesting data, hedge fund managers are turning to specialist coaches. They are seeking to gain a better understanding of the trading process, the way the mind works and the behavioural biases that affect us all, with one clear goal: gaining a performance edge. Steven Goldstein, a trader performance coach at BGT Edge, said: “Returns have declined over recent years. It’s more competitive and it’s more difficult so people are looking for every advantage they can get.”
Activist Investor Plans to Increase Pressure on Bob Evans (NYTimes)
Last week, Bob Evans Farms announced that it had declined to make strategic changes recommended by one of its biggest investors. Now that investor, the hedge fund Sandell Asset Management, plans to turn up the heat on the restaurant operator. Sandell intends to announce Monday that it will move for change at Bob Evans, potentially including replacing its directors, according to people briefed on the matter who spoke on condition of anonymity because they were not authorized to speak publicly about the fund’s plans. The hedge fund will begin a so-called consent solicitation, which will let investors vote on changes at Bob Evans outside an annual meeting, the people said. The fund could also seek to amend the restaurateur’s bylaws.
Herbalife Said to Use Moelis in Effort to Sway Ackman Investors (BusinessWeek)
Herbalife Ltd. (NYSE:HLF) is taking a page from Bill Ackman’s playbook. Ackman has spent the past year urging Herbalife shareholders to sell their stock, saying the marketer of vitamins and weight-loss shakes is a pyramid scheme. Now Herbalife is approaching investors in Ackman’s hedge fund, suggesting they pull their money from the $12 billion firm, according to three people with knowledge of Herbalife’s strategy. Herbalife’s argument: Ackman’s bet, which has lost as much as $500 million, is risky and irresponsible, said the people, asking not to be named because the campaign is private. Moelis & Co., an investment bank working for Herbalife, arranged a meeting with Cliffwater LLC, which advises clients on hedge-fund investments, and Herbalife executives, according to two people with knowledge of the gathering…
Former Perry Asia Head Said to Raise $1.1 Billion New Fund (Bloomberg)
Alp Ercil, a former regional head of New York-based hedge fund Perry Capital LLC, won $1.1 billion of investor commitments for his second Asia distressed-assets fund, according to two people with knowledge of the matter. ARCM Master Fund II will focus on three- to five-year investments in credit and equity securities, said the people who asked not to be identified because the information is private. The amount of capital committed made it the largest hedge fund started in Asia this year, according to data from Singapore-based Eurekahedge Pte. Global banks have scaled back lending and distressed investments in Asia after the global financial and European debt crises led to tighter regulatory scrutiny of their investments since 2008…
Trading Led by Funds as Collusion Probes Roil Market: Currencies (BusinessWeek)
Fund managers and electronic traders for the first time account for more than half the $5.3 trillion-a-day currency market as regulators investigate at least 11 dealers for alleged collusion on benchmark rates. Hedge funds, pension managers, central banks and smaller lenders made up 67 percent of the increase in daily trading, from about $4 trillion in 2010, the Bank for International Settlements said in its quarterly review yesterday. Their share rose to 53 percent from 48 percent, while dealer banks, which buy and sell from clients, held steady with 39 percent.
Investors getting comfortable with taper prospects: Expert (CNBC)
SAC’s Cohen Told SEC Hedge Fund Friend Advised Wyeth Share Sale (SFGate)
SAC Capital Advisors LP founder Steven Cohen told U.S. regulators a decision to sell shares at the heart of a $276 million dollar insider-trading case going to trial next month was based on advice from outside his firm. Lawyers for former SAC fund manager Mathew Martoma, who is accused of persuading Cohen to sell shares of two drugmakers based on illegal tips, made public 40 pages from a 253-page transcript of Cohen’s day-long deposition last year in an investigation by the U.S. Securities and Exchange Commission. Martoma argues that the previously undisclosed testimony shows he wasn’t involved in Cohen’s decisions to sell Wyeth and then short shares of Wyeth and Elan Corporation, plc (ADR) (NYSE:ELN).
Fees in play as more administrators see consolidation (PIOnline)
Consolidation among alternative fund administrators is expected to continue over the next several years, which sources say will mean higher costs for asset owners in the short term. But some say in the long run, costs could decrease. Industry participants and consultants, while not speculating on which firms would be ripe for acquisition, agreed consolidation among fund administrators will continue for a variety of reasons — the continuing pressure to reduce fees as well as the added costs that come from technology upgrades and heightened regulation. Peter Laurelli, vice president at eVestment LLC, Marietta, Ga., said such changes won’t be “game changers” for those investing in hedge funds or funds of funds. But he added there will be “several big headlines” in industry consolidation that could impact those that invest in hedge funds through separate accounts, which are expected to see higher fees in the short term.
Hedge fund plans to bet on Brazilian fraud cases (VCPost)
Platinum Partners sees Brazilian fraud as a potential boom industry in the emerging markets. According to a Financial Times report, the New York-based hedge fund intends to make a bet in the recovery of Brazilian fraud claims valued at USD 5.1 billion. The report said the investment showed just how deep investors were willing to go to the “more esoteric areas of emerging markets in their quest for yield.” According to the report, Platinum Partners will be working with Martin Kenney, a Canadian lawyer who has a law firm based in the British Virgin Islands. Kenney, an international asset chaser, will be putting together a portfolio comprised of 10 cases which the hedge fund will invest in. Platinum Partners Portfolio Manager Jack Simony told the Financial Times that he will not be able to disclose the terms of the agreement with Kenney’s law firm due to commercial and legal reasons…
Paulson Extends Comeback With Merger Bets as Stocks Rally (Bloomberg)
It’s been a comeback year for John Paulson. After wrong-way bets on the U.S. recovery, the euro crisis and gold had helped cut assets by about half from the 2011 peak, his main hedge funds are posting double-digit returns. The New York-based firm’s Advantage strategy, which suffered record losses in 2011, is up 30 percent this year through November, and the Recovery fund surged 55 percent, according to two people briefed on the returns, who asked not to be identified because the information is private. Paulson, 57 and best known for making $15 billion in 2007 betting against subprime mortgages, is rebounding with prescient bets on companies in takeovers, a strategy known as merger-arbitrage where he got his start as a trader, and by investing in stocks that surged as global central bank policies propped up markets. The one sore spot remains his gold fund, which has shriveled to $370 million, most of that the billionaire’s own money.
Hedge Fund Lions’ Den live (Risk)
Reality TV meets the hedge fund world in the first season of Hedge Fund Lions’ Den (HFLD). The six-part made-for-web mini-series examines the trials and tribulations of emerging managers (EMs). These managers have exclusive access to three of the hedge fund world’s biggest names for advice and guidance. Combining the best of UK TV shows Dragons’ Den and The Apprentice, HFLD pits the emerging hedge fund managers against three industry ‘lions’ who offer advice, guidance and ultimately make a decision about whether or not to invest in their fund. Managers have just two minutes to pitch their fund.
Soros group warming on Eurobank (Ekathimerini)
The countdown for the share capital increase of Eurobank started a week ago and Kathimerini has learned that even the George Soros group has expressed an interest in acquiring the lender that is fully state-controlled. Sources say that Soros group officials are seriously examining the possibility of entering the process for the sale of a controlling stake to a strategic investor, provided that the terms (mainly the price of each share for the transaction) are attractive and favorable. The same sources say that if this group decides to make a move to acquire Eurobank, the benefits will be multiple. Another strong element for the success of the tender for Eurobank will be the likely participation of Apollon, a US fund that is considered one of the three or four biggest in its category in the world, according to sources in the know on the other side of the Atlantic.
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