Hedge Funds

Flawed Dell compromise saves faces all round

2 Aug 2013

Letting the $24 bln buyout fade away would have hurt most shareholders, the board and the founder. But the PC maker’s worsening prospects left little room. A 2 pct hike in the offer price in return for a tweaked voting procedure won’t delight anyone but should seal the deal.

SAC charges challenge hedge fund model

26 Jul 2013

The U.S. government’s indictment suggests recruitment should focus on compliance over money-making ability, turns investment “edge” into a dirty word, and implicitly questions the “mosaic” technique of information-gathering. It’s a worry for Steve Cohen’s industry peers.

SAC staffers take the bullet meant for Cohen

25 Jul 2013

Unable to nail the billionaire hedge fund boss, the U.S. has charged his firm instead. SAC may be culpable, but the allegations largely involve actions years ago by ex-employees. That leaves current staff to suffer the fallout. There’s too much spite mixed in with the justice.

Dan Loeb’s Yahoo exit hurts investors twice over

22 Jul 2013

The Internet firm is buying back most of the hedge funder’s stake, held by Third Point, for $1.2 bln. That sucks up most of the cash Yahoo reserved for repurchases. It also heralds the departure of three Third Point-approved directors, robbing Yahoo of some much-needed advisers.

Steve Cohen case ends with whimper – as may SAC

19 Jul 2013

The SEC has accused the billionaire hedge fund boss of turning a blind eye to insider trades by two of his firm’s employees. A civil, rather than criminal, case isn’t much to show for a years-long probe. It may at least leave Cohen with his ego bruised, managing only his own money.

Higher volatility is the new normal in credit

10 Jul 2013

The end of Fed bond buying will remove a crutch that supported credit markets even as investment banks cut their trading inventory. Worse, it would come as credit ETFs are suffering outflows. Less liquid markets bring bigger price swings. For the smart money, it’s an opportunity.

Neat compromise may bridge fund manager pay divide

17 Jun 2013

Bonuses for fund managers may be capped under plans pushed in Brussels. Other performance fees may be outlawed too. One alternative approach would link bonuses and fees with strict multi-year results while deferring payments. The idea is clever, and might work.

Apollo may quadruple its money on oil start-up

11 Jun 2013

The buyout firm is taking Athlon public just three years after drilling $400 mln into it. With EBITDA set to double this year and possibly next, the oil explorer may be worth $2 bln. With such returns, it’s no wonder Apollo boss Leon Black wants to sell anything not nailed down.

Leave it to a hedgie to take on Einstein

7 Jun 2013

A brainiac hedge fund manager thinks he has cracked one of physics’ biggest mysteries. Scientists are sceptical, but admit Eric Weinstein’s ideas deserve study. Even if he is wrong, it’s nice for once to see a Wall Street boffin apply his skills to questions of beauty and truth.

Man Group needs to address stock volatility

5 Jun 2013

If hedge funds are meant to deliver uncorrelated returns, why is Man’s share price so unstable? The latest tumble comes after its main fund was blown off course. Perhaps more diversification would help. Otherwise, the ups and downs suggest Man is worth more in private hands.

Breakup looks timely for Kleinwort Benson owner

28 May 2013

Activists have found a vulnerable target in RHJ. A previous attempt to unlock the value of its esteemed Kleinwort private bank failed. But RHJ’s stubborn share price weakness, combined with its ill-judged bid for Germany’s BHF, gives the latest assault more chance of success.

Loyalty even to Steven Cohen has its limits

20 May 2013

An intensifying legal onslaught at the hedge fund manager’s $15 bln SAC probably will force the remaining outside investors to run. Even Cohen’s legendary 25 pct annual returns at some point aren’t worth the risk. The firm’s most optimistic future looks to be as a family office.

Greek bank recap: Germany please look away

14 May 2013

Warrants awarded to investors, like hedge funds, that help rescue Greek banks could bring 800 percent-plus returns. That reflects massive risk. The troika is so desperate for Greece to recover that it is forgoing the potentially epic upside on its own rescue package.

Fannie/Freddie buyout plan needs killing off

1 May 2013

A few big hedgies, including Paulson & Co and a Carlyle fund, want Uncle Sam to sell Fannie Mae and Freddie Mac into private hands. Getting the bailout twins off the government’s books is appealing. But the plan would privatize short-term gains and leave taxpayers on the hook.

U.S. courts make mark in Argentina creditor spat

22 Apr 2013

Judges have, unusually, tried to broker a deal between the Latam nation and hedge funds still objecting to debt swaps in 2005 and 2010. Ordering Argentina to honor its contracts and pushing others to clarify theirs were also useful moves. The rule of law is coming out ahead.

Fund managers need a risk-culture rethink

8 Apr 2013

Regulation is the chief buy-side risk, a new study has found. That’s bizarre since rules should dilute financial dangers. Asset managers may have to challenge regulatory caution if they are to run balanced investment risks. The high-grade sovereign bond bubble is a case in point.

EU-shaped bonus cap might just fit fund managers

4 Apr 2013

A German MEP wants to impose limits on asset managers’ bonuses. It is hard to see why statutory intervention is required, but reform of pay policies could foster asset allocation behaviour that better serves clients’ long-term interests. Tighter-fitting bonus caps might help.

Maybe SAC should forget about other people’s money

15 Mar 2013

Steve Cohen’s $15 bln hedge fund firm is paying $616 mln to settle SEC insider trading charges. It would be an ignominious time to follow legends like Stan Druckenmiller, but he is already losing a quarter of outside investor funds. It could be time to manage only his own cash.

Hess rejects activist push – by caving to it

4 Mar 2013

The $24 bln oil company’s inefficient sprawl and cozy board made it a ripe target for Elliott Management. Hess claims the hedge fund’s prescriptions are wrongheaded, but is selling assets, nominating new directors and returning capital. That’s much of what Elliott was pushing for.

Man has to run hard to stand still

28 Feb 2013

New Chief Executive Emmanuel Roman faces entrenched threats. The hedge fund manager has delivered strong earnings, good investment performance and tight cost control. But recent share-price strength belies the risk of a political flare-up and falling assets.