John Paulson, the billionaire money manager who’s vowed to restore his hedge fund to profitability after the worst year of his career, may have to take a cue from rival Ken Griffin. Paulson’s $28 billion firm, Paulson & Co., will need to generate a 104 percent return to recoup a 51 percent drop in one of his largest funds after wagers on a U.S. recovery went awry. Until he hits that mark, Paulson will have to forgo his 20 percent performance fee, and will collect only his 1.5 percent management fee. It has taken Griffin, the billionaire founder of Citadel LLC, three years to recover most of the 55 percent he lost for investors in 2008. “With Paulson’s assets, size and longer-term investing style, it’s going to be difficult for him to make money back,” said Vidak Radonjic, managing partner at Beryl Consulting Group LLC in Jersey City, New Jersey, which advises clients on investing in hedge funds. “He has large, concentrated stock positions and the market isn’t really rewarding those with holdings like that.
Soros Says World Economy Facing ‘Vicious’ Deflationary Cycle (WSJ)
George Soros, the billionaire U.S. investor, said Monday the global economy is facing a “vicious” deflationary cycle as members of the euro zone cut back sharply on spending to bring their budget deficits under control, crimping demand and squeezing prices. The euro zone faces a period of “draconian austerity” as a result of the measures it has employed to deal with its sovereign-debt problems, even if it survives the current crisis, Mr. Soros said in a speech at a university founded by billionaire Indian businessman Azim Premji. While the euro zone now has a central fiscal authority in the form of the European Financial Stability Facility, its terms will be dominated by creditor nations such as Germany, Mr. Soros said. “Within the euro system, it’s the creditors who are going to call the shots… Germany is dictating the rules that are going to be followed by the European treasury,” he said.
Canadian Pacific’s Cleghorn Backs CEO, Encourages Ackman To Join Board (WSJ)
Canadian Pacific Ltd. Chairman John Cleghorn said in an open letter to shareholders that the railroad’s board fully backs Chief Executive Fred Green and the entire management team, and encouraged activist investor Bill Ackman to accept CP’s offer to join its board. Mr. Ackman’s Pershing Square Capital Management LP hedge fund owns just over 14% of Canadian Pacific and wants to oust CP’s chief executive in favor of Hunter Harrison, former CEO of company rival Canadian National Railway Co. The two sides took part in a heated exchange last week, culminating in Canadian Pacific releasing a letter to Mr. Ackman in a regulatory filing that criticized the investor for “inaccuracies and mischaraterizations” that appeared in the media about management changes. CP said Pershing Square is advocating change in management, but hasn’t presented any “detailed, credible plan.”
Jim Rogers Thinks Stocks Will Go Up in 2012 (Insider Monkey)
Legendary investor Jim Rogers shared his outlook for 2012 in an interview with Shanghai’s “First Financial Daily” newspaper. Jim Rogers predicts that world stock markets will bottom up and investors should get ready for an “election market” jump. Jim Rogers is still bullish about commodities in the long-run. However, he expects an even larger world economic crisis in 2013 or 2014. Here is a rough translation of Jim Rogers’ interview…
Ex-Soros Trader to Return Outside Money in Fund (Bloomberg)
Former Soros Fund Management LLC trader John Zwaanstra plans to return outside capital in Penta Investment Advisers Ltd., the Asia-focused hedge fund he set up in 1998, said two people with knowledge of the matter. The company plans to give investors more details this week, said the people, who asked not to be identified. Penta managed as much as $2.9 billion in mid-2011, about 40 percent of which came from Penta principals, said another person. Its assets have fallen below $2 billion, said one of the people familiar with the plan to return investors’ money. Zwaanstra and John Pridjian, chief financial officer of Penta Investment Advisers, didn’t reply to Bloomberg e-mails. Zwaanstra’s younger brother Todd, who works as a trader at its Hong Kong unit Old Peak Ltd., declined to comment, citing a company policy of not talking to the press.
Oil Trades Near Four-Day Low As Merkel, Sarkozy Meet To Revive Euro Zone (Bloomberg)
Oil traded near its lowest level in four days, erasing earlier gains as German and French leaders met in an attempt to revive growth in the euro region. Hedge funds increased bullish positions on WTI oil by 4.1 percent in the week ended Jan. 3, according to the Commodity Futures Trading Commission’s Commitments of Traders report. Open interest advanced 3.5 percent, rising for a second week after falling in December to the lowest since May 2007, according to the CFTC.
Hildebrand Steps Down At SNB (Bloomberg)
Philipp Hildebrand resigned as head of the Swiss central bank after a currency transaction by his wife last year dented the credibility of the franc’s chief guardian. As the global financial crisis spurred investors to buy francs, a haven in times of turmoil, the central bank tried to initially stem its advance by selling the currency in the 15 months through June 2010. Hildebrand introduced the cap in September after the franc reached a record against the euro, trading near parity in the previous month. That move came three weeks after a currency purchase by Kashya Hildebrand. A former hedge fund employee who owns a Zurich art gallery, she has defended the purchases, saying she bought dollars because the currency was “at a record low and almost ridiculously cheap.”
Prediction: Stocks And Gas To Rally In 2012 (Bloomberg)
The diverging views follow a year of near-record volatility in which just two of 12 Wall Street forecasters tracked by Bloomberg came within 60 points of the S&P 500’s close and FTN’s Low was the only economist out of 72 to predict the 10-year yield would slip to 2 percent. Hedge fund managers posted their second-worst return on record and investors pulled money from mutual funds that buy U.S. stocks for a fifth straight year.
DB, FRM Launch Hedge Fund Seeding Managed Account Platform (FINalternatives)
Deutsche Bank will partner with hedge fund research and investment specialist Financial Risk Management to launch what they’re billing as the industry’s first hedge fund seeding managed account platform. FRM, through its hedge fund seeding division FRM Capital Advisors, will select and negotiate strategic investments in emerging managers. Investments will be made through managed accounts on the dbalternatives Discovery platform, based on the Deutsche Bank managed account platform established in 2002.
BGAM Adds To Senior Management Team In London (FINalternatives)
Bryan, Garnier Asset Management has appointed Steve Wallace as managing director responsible for commercial activities. He will also be part of the senior management team and the investment committee. Wallace, who will be based in London, brings with him a strong background in business development, client relationship management and wealth management across EMEA, Australia and New Zealand, having spent nearly 15 years working with a wide variety of clients.
Gundlach Gives His 2012 Outlook (HFN)
Jeffrey Gundlach was talking this week not about the recent legal settlement with his former employer TCW but his outlook for 2012. The DoubleLine Capital founder offered his views of the worldwide financial markets for the coming year during his “Just Markets” webcast Thursday, which was accompanied by a slideshow of charts to buttress his talking points. Gundlach, whose Los Angeles-based firm invests principally in bonds, weighed in on a variety of topics from the U.S. dollar to the financial crisis in Europe.
