Texas’s Permanent School Fund may hire in-house money managers to oversee its $25 billion in assets because returns are being “eaten alive” by hedge-fund fees, according to Chief Investment Officer Holland Timmins. Returns were less than 1 percent for the 44 months through November on assets managed by the five companies that bundle multiple hedge funds into single investment vehicles, Timmins said Jan. 25 at a State Education Board meeting. After fees, the return was negative, he said.
Greenlight Capital, JPMorgan Cazenove Employees Fined by FSA on Share Sale (Bloomberg)
Employees at Greenlight Capital Inc. (GLRE) and JPMorgan Chase & Co. (JPM)’s Cazenove unit were fined in a second wave of U.K. sanctions over Greenlight’s sale of Punch Taverns Plc (PUB) shares in 2009. Alexander Ten-Holter, the hedge fund’s former compliance officer, was fined 130,000 pounds ($204,000) for failing to “make reasonable enquiries” before selling the firm’s holding, the Financial Services Authority said in a statement today. Caspar Agnew, a Cazenove trader, was fined 65,000 pounds for failing to identify and report a “suspicious order.”
More Fines in Greenlight Insider Case in Britain (Deal Book)
Britain’s financial regulator said Friday that it had fined a former Greenlight Capital compliance officer and a JPMorgan Cazenove trader in connection with Greenlight’s sale of shares in a British pub operator more than two years ago. The Financial Services Authority said Alexander E. Ten-Holter, Greenlight’s former compliance officer, was fined 130,000 pounds, or $204,000, for failing to ensure that an order to sell shares was not based on inside information. The regulator also fined Caspar J.W. Agnew, a trading desk director at JP Morgan Cazenove, 65,000 pounds for not identifying that the sale order could be suspicious and for not reporting it to his employer. Both are based in London.
In Punishing Year for Hedge Funds, Biggest One Thrived (Deal Book)
The world’s biggest hedge fund is also one of the best performers. Bridgewater Associates, which manages nearly $120 billion, posted returns of 23 percent in 2011 — a year when the average hedge fund portfolio lost 5 percent. Against the backdrop of fear over European debt and stagnant global growth, the hedge fund, led by one of Wall Street’s more enigmatic titans, Ray Dalio, sidestepped the mess. The fund did it with bets on United States Treasuries, German bonds and the Japanese yen, according to people familiar with the firm’s investment strategy, who spoke on condition of anonymity because the information is private.
Soros Says He’s Among ‘Angels’ Who Want Civilization to Survive (Bloomberg)
Billionaire investor George Soros said he’s “now on the side of the angels” who believe that financial markets have a responsibility to preserve human civilization.
Riots in US Streets? Why Soros’ Prediction Is Unlikely (CNBC)
Raging malcontents with picket signs torching buildings, attacking police and obliterating the social order—that’s what billionaire, leftist and one-percenter George Soros is forecasting for America and the Occupy movement.
Hedge Funds Lift Romney’s Income (The Boston Globe)
Though Mitt Romney made his reputation as a private equity investor, his tax returns show the presidential candidate has a large portion of his wealth in an even more aggressive corner of the investment world: hedge funds. A Globe examination of Romney’s taxes and a prior financial disclosure shows that about one-third of the assets in his Individual Retirement Account are in hedge funds, predominantly those run by his former firm, Bain Capital in Boston. Romney’s IRA could be as large as $101 million, according to his financial disclosure form, although he is not required to provide the exact amount. Of the 25 investments in that retirement account, 11 are Bain hedge funds.
Buffett in Thick of Political Controversy (The Street)
Not usually one to shy from the spotlight, Warren Buffett has used a wide range of mediums to get his points and opinions across. With a fortune ranking him among the world’s wealthiest individuals, it is no wonder that when he grabs the microphone or puts pen to paper, people are there watching.
Hedge Fund People Moves: Steven Solmonson Joins Spectrum Asset Management (HedgeCo.Net)
Senior hedge fund professional Steven Solmonson has joined $13.4 billion securities firm Spectrum Asset Management, Inc. “Steven and I have known each other for more than 30 years, having worked together at Drexel Burnham Lambert where we launched DBL Preferred Advisory Management in 1982.” Mark Lieb, founder and CEO of Spectrum Asset Management, said. “Steven’s experience in the capital markets and, in particular, working with pensions, endowments and professional family offices globally, will make him a tremendous addition to Spectrum’s team.”
Bankers at Davos Humbler as Austerity Hits (Bloomberg)
Leaders of the world’s biggest banks touted the virtues of austerity at the World Economic Forum in Davos — for themselves, not just for over-indebted governments. One of the report’s conclusions is that financial companies that aren’t banks — the so-called shadow-banking system that includes insurers and hedge funds — may be better suited than regulated banks to provide long-term credit to companies and homeowners. The Oliver Wyman survey found that more people in the U.S. and the U.K. said they trusted asset managers than banks to manage their retirement savings.
Pershing Square’s $25 Million Gift Puts Hedge Fund on Signature Marquee (Bloomberg)
Hedge fund manager William Ackman donated $25 million to New York’s nonprofit Signature Theatre, which said it will rename its new, Frank Gehry-designed off- Broadway complex after his foundation. The “Pershing Square Signature Center” is scheduled to open on Tuesday with three theaters, two rehearsal studios and public space on W. 42nd Street, between Ninth and Tenth Avenues. Ackman, 45, is chief executive and founder of Pershing Square Capital Management LP.
Greek Debt Wrangle May Pull Default Trigger (Bloomberg)
Opposition to payouts on Greek credit-default swaps from European Union policy makers is softening as disputes over a voluntary debt exchange threaten to push the nation into default. Any agreement between the Greek government and the Washington-based Institute of International Finance on debt writedowns will only bind 50 percent of investors in the 206 billion euros ($270 billion) of notes being negotiated, Barclays Capital estimates. Hedge funds may resist a deal, seeking to get paid in full or compensated from insurance contracts.
Gold Bulls Ascendant Amid Best Start to Year in Three Decades: Commodities (Bloomberg)
“There are now alternatives if equities begin to pick up,” said Jessica Cross, chief executive officer of VM Group, a London-based commodities research company. “It’s difficult to get the same amount of physical demand again this year, which will probably put a bit of a dampener on prices.” Investors added about 171.5 tons of gold to their ETP holdings last year, valued at $9.5 billion at today’s price. Flows may reach 250 tons this year, Barclays Capital estimates. Hedge funds and other money managers also are getting more bullish. Speculators raised their net-long position to 116,978 futures and options in the week ended Jan. 17, the first gain in six weeks, Commodity Futures Trading Commission data show.
Fed Easing May Harm Long-Term Economic Growth, Warsh Says (Bloomberg)
Former Federal Reserve Governor Kevin Warsh said the central bank’s record monetary easing may set back the U.S. economic expansion and that he’s concerned policy makers are pushing investors into riskier assets. Warsh is now a visiting fellow at Stanford University’s Hoover Institution and works as a consultant to investors. His clients include the Duquesne Family Office, which Stanley Druckenmiller created to manage his own money after closing his hedge fund, Duquesne Capital Management.
Peixe Urbano Boosts Cash and Hiring to Beat Groupon in Brazil (Bloomberg)
Peixe Urbano, the largest Brazilian online daily-deal provider, is loading up on capital, recruiting U.S. engineers and investing in new products to fend off Groupon Inc.’s expansion on its home turf. Peixe Urbano said on Jan. 18 that it raised an undisclosed amount of capital in a funding round led by New York-based Morgan Stanley (MS) and Baltimore-based T. Rowe Price to “fuel growth and consolidation” in the region. The company had previously raised money from hedge fund Tiger Global Management LLC and venture-capital firms General Atlantic LLC and Benchmark Capital.
McCurdy on Hedge Fund Industry (Bloomberg)
Patrick McCurdy, head of capital development at Merlin Securities, talks about the hedge fund industry and the rise in demand for funds with a “market neutral” strategy in stocks. McCurdy speaks with Deirdre Bolton on Bloomberg Television’s “Money Moves.”
Pandit Does Davos, 0.1% Gloat, Madness Reigns: Jonathan Weil (Bloomberg)
Sometimes a single fact stands out amid all the clutter, offering a flash of insight and clarity. Here is one of them: Citigroup Inc. (C) Chief Executive Officer Vikram Pandit is a co-chairman of the World Economic Forum’s annual meeting this week in Davos, Switzerland. Pandit joined Citigroup in 2007 after selling it his Old Lane Partners LP hedge fund, which the bank shut the following year. Pandit’s take from his share of the sale was $165 million, the last $80 million of which he received in July.
Germany Poised to Woo U.K. With Transaction Tax Alternative (Bloomberg)
The EU plan would tax stocks, bonds, money-market instruments and derivatives at source, including at banks, hedge funds and insurance companies. It would exclude government bond auctions, while including secondary-market trading and repurchase-agreement markets, according to EU documents. The financial-transaction tax would be set at 0.1 percent for stocks and bonds and 0.01 percent for derivatives.
Yapi Kredi Surges on UniCredit Bonds, Fed Policy: Istanbul Mover (Bloomberg)
An improved outlook for global liquidity helps Yapi Kredi and other Turkish banks because it also eases concerns about funding the country’s record current-account deficit, Bugra Bilgi, a hedge fund manager at Garanti Asset Management in Istanbul, said in e-mailed comments.
French Hedge Fund Aims to Boost Japan (Reuters)
French hedge fund Capital Fund Management said on Friday it aims to boost Japanese assets under management 10-fold over the long term to bring them more in line with its investments in Japan which account for 10 percent of its overall portfolio.
Reuters Magazine: The One Percent War (Reuters)
Within the 1 percent, awareness of the different tiers of wealth is as keen as an Indian matchmaker’s sensitivity to the finer divisions of caste. And thanks to the wiretapping authority of the Manhattan federal prosecutor, the hoi polloi were recently able to eavesdrop on one conversation within the 1 percent that revealed some of these internal distinctions. The dialogue was between Raj Rajaratnam, the hedge fund investor convicted of insider trading last summer, and Anil Kumar, who was at the time a partner at McKinsey, the management consultant. The two were discussing their mutual friend, Rajat Gupta, the former managing director of McKinsey. At the time of the conversation – August 2008 – Gupta was considering a move from the blue-chip board of Goldman Sachs to serve as an adviser to KKR, the legendary private equity group.
ASIA CREDIT UPDATE: Spreads Narrow; Berlian Laju Tanker Bonds In Focus (Reuters)
Asian credit spreads tightened on the last trading day of the holiday shortened week with bonds from Berlian Laju Tanker in focus after the company said it will stop servicing its debt, a move that will affect USD418m in repayments this year. The 2014 bonds of Indonesia’s largest oil and gas shipping company Berlian Laju Tanker were steady at 26/30 cents on a dollar after the previous days fall. Late on Thursday, some hedge fund buying lifted the price from lows stuck following the repayment freeze announcement.
George Soros Talks With Chrystia Freeland In Davos (Reuters Hedge World)
Thomson Reuters Digital Editor Chrystia Freeland spoke with George Soros at the World Economic Forum in Davos, Switzerland. In a series of videos for Reuters TV, Soros discusses why his fund bought $2 billion of MF Global Italian bonds, his secret for saving Europe, an Obama-Romney election and the odds for democracy in Russia and Myanmar.
Spar At The Bar In Davos: Salmon Vs. Scaramucci (Reuters Hedge World)
Reuters blogger Felix Salmon meets his nemesis, hedge fund manager and philanthropist Anthony Scaramucci, in a face-to-face showdown at the Hotel Europe’s Piano Bar in Davos. “It seems to me that any financial product which has to be sold so aggressively is … there’s something a little bit wrong with that,” Salmon says.
The Short List (WSJ)
Robert Harris is a versatile purveyor of popular fiction, He’s tackled ancient Rome (“Pompeii”), World War II (“Enigma”) and modern-day politics (“The Ghost,” made into Roman Polanski’s movie “The Ghost Writer”). Now Mr. Harris, a former journalist, turns to high-finance intrigue. “The Fear Index” is about a Geneva-based global hedge fund with a scarily fast, powerful algorithm that predicts investor behavior and makes billions. Then it starts acting up. Quant analysts might unearth some false notes, but compared with usually ham-handed corporate thrillers, this is as welcome as “Margin Call” or a new Joseph Finder novel. Mr. Harris is working on the screenplay.
Euro Zone Needs to Reduce Headcount, Czech Banker Says (WSJ)
Kamil Janacek, a rate setter at the Czech Republic’s central bank, which just approved a €1.5 billion contribution to the euro-zone’s bailout fund via the International Monetary Fund, has concerns that the currency zone’s problems won’t stop with Greece and that currently agreed levels of financial support are insufficient. What’s more, a sought-after deal in which lenders to Greece agree to further haircuts looks unlikely to happen. “It must be clear that without participation of at least 90% of private creditors, the deal would be ineffective. And we know that the hedge funds are fiercely against the deal. They’re protected by CDS and in the case of a Greek default they’ll obtain the whole sum, whereas now they’ll obtain only 30%,” Mr. Janacek said.
Wall Street’s Ping Pong Wizards in Action (WSJ)
The idea for the tournament was Andrew Lipman’s, a board member of BBBS and a head of marketing at T.A. McKay & Co. In 2007, Mr. Lipman recognized that the organization was doing well with corporate America, but not so much with hedge funds and financial services. “We were looking to create an event that would raise our profile among those groups and raise money along the way,” he said.
Hatteras Focuses On Picking Managers, Not Stocks (Market Watch)
The Hatteras Alpha Hedged Strategies Fund aims for the best of both worlds: to provide investors with the benefits of a hedge fund minus the risk. The multi-alternative category fund, with total assets of about $397 million, invests in hedge funds managed by 23 managers using combinations of five strategies. It gives investors exposure to hedge funds that they wouldn’t normally have access to as an individual, but it also provides the liquidity, security and lower fees of a mutual fund.
Partner At New Jersey Hedge Fund Disappears With Investor Cash (FINalternatives)
A Jersey City, N.J.-based hedge fund firm has allegedly been bilked by one of its own. According to sources familiar with the Osiris Fund, partner Peter Zuck has fled with investors’ money and the fund is now defunct. Reached by phone, Michael Spak, CEO of Osiris Investments, which manages the fund, declined to comment due to ongoing investigations. But according to one source, it was Spak who first reported the 61-year-old Zuck to the FBI.
Turchansky: Rising tensions could drive up oil prices, forecasters say (Montreal Gazette)
Marc Faber, who writes the Gloom, Boom & Doom investment newsletter based in Hong Kong, delivered the message that intervention by governments in economic policy intensifies volatility. And things aren’t about to get any better.
Helima Croft, a director of commodities research with Barclays Capital in New York, and former senior economic analyst with the Central Intelligence Agency, gave her top five list of military hot spots in the Middle East and North Africa that could explode, taking the price of oil skyward with them.
Ex-Valhalla Forex Trader Goes It Alone (FINalternatives)
Valhalla Capital veteran Stephen Hart is back with a new hedge fund firm and a maiden foreign exchange and commodities trading adviser offering.
BNP Expands Hedge Fund Administration Services (HFN)
Paris-based global bank BNP Paribas has expanded its hedge fund and fund of funds administration services. The expansion will focus on transparency, market exposure, liquidity and control, according to a company statement.
Hedge Fund Managers Hit Davos (HFN)
Some of the world’s top hedge fund managers have shown up at the annual World Economic Forum in Davos, Swizerland this week. Not a surprise when considering this is the premier event for political and business leaders to rub shoulders while discussing the world’s problems, with income inequality at the top of the list.
Samir Barai Receives SEC Ban, Fined $3.4M (HFN)
Another hedge fund manager caught up in the government’s continuing insider trading probe has been banned from the financial industry and fined over $3 million. Samir Barai, the founder of now-defunct Barai Capital Management, was barred by an order issued Wednesday by the Securities and Exchange Commission from “association with any broker, dealer, investment adviser, municipal securities dealer or transfer agent.”
AIFMD Polls As Most Ambiguous New Regulation Facing Hedge Fund Industry (HFM Week)
The Alternative Investment Fund Managers Directive is proving the most troublesome of the recent slew of regulations facing the hedge fund industry, according to more than a third of those quizzed yesterday at a Bloomberg conference in London, detailed an IMS Group statement Thursday.
Northern Trust Launches New FOHF Reporting Platform (HFM Week)
Fund administrator Northern Trust has launched a new reporting platform for its fund of hedge funds clients providing better, more flexible access to key data elements, it said in a statement Thursday.
Why You Shouldn’t Blame ETFs For Wild Markets (CNN Money)
Are exchange-traded funds a prime culprit in one of the signature afflictions of the markets today — the tendency of huge swaths of stocks or other assets to swing dramatically up or down at the same time? Critics are pointing their fingers at ETFs. But evidence for their nefarious role is lacking. Others are particularly worried by leveraged ETFs, which use derivatives to amplify bets. These instruments “corrupt the markets by exacerbating price trends” both up and down, wrote hedge fund manager Doug Kass of Seabreeze Partners in an article on the Real Money Pro website this fall. The issue has caught the attention of a U.S. Senate subcommittee, which held a hearing in October to investigate ETFs and their role in stock volatility; the SEC is also investigating.
Hard Times For Hedge Fund Investors (Financial Times)
After a bad week for alternative asset managers, John Authers, Long View columnist and James Mackintosh, investment editor, discuss hedge funds’ long term performance and why it’s a good time to be a hedge fund manager but not to be a hedge fund investor.
CAIRN CAPITAL “Expect a Brutal 2012” (Value Walk)
Cairn Capital, one of the world’s largest hedge funds, today manages about $25 billion. In their January 2012 letter, they discuss their thoughts for 2012: They think Euro-Zone recession will be much worse than the general consensus thinks. They think QE is running out of effectiveness. Their conclusions are below:…
Socgen: Hedgies Short Euro Against Dollar “Like Never Before” (Financial Times)
A chart from SocGen’s latest Hedge Fund Watch showing that as of last week, hedge funds were short the Euro against the dollar “like never before”… Make of it what you will — obviously their positions have fluctuated dramatically in the last couple of years (along with the exchange rate itself).
Opening Bell: 01.27.12 (Deal Breaker)
Hot Links: Stoopid Bullish (The Reformed Broker)
Recent Tweets (The Aleph Blog)
CWS Market Review – January 27, 2012 (Crossing Wall Street)
10 Friday AM Reads (The Big Picture)
Ackman’s Huge Arts Donation, Shorting The Euro, Poor 2011 Performance, Hedge Funds Can’t Foreclose On Acropolis And More (Reuters Hedge World)
