Grant Capital Partners is being shut down. This hedge-fund manager wind-down is brought to you by Geoff Grant, one of the same gentlemen behind Peloton Partners’ enormous fall.
Fun fact from the FT’s Sam Jones:
Grant Capital eschewed the asset-backed securities and heavy leverage that led to the downfall of Peloton and focused on highly liquid instruments such as currencies, bonds and interest rate derivatives.
While funds that specialise in trading mortgages have enjoyed some of their best returns in the past two years, global macro funds have floundered.
Oops. Read more
… or something. You can’t make these people up:
[Anthony] Scaramucci, the organizer of the dinner, told me the next day that the guests had witnessed the “activation” of a “sleeper cell” of hedge-fund managers against Obama. “That’s what you see happening in the hedge-fund community, because they now have the power, because of Citizens United, to aggregate capital into political-action committees and to influence the debate,” he said. “The President has a philosophy of disdain toward wealth creation. That’s just obvious, O.K.? We talked about it all night.” He later said, “If there’s a pope of this movement, it’s Lee Cooperman.” Read more
At around 8.20am this morning, there was some news from the Theatre-Casino in Zug.
Xstrata had adjourned EGM for the $80bn merger following a “development”. Read more
It’s an indirect path from one to the other.
Gawker on Thursday unloaded some 950 pages of filings from Bain Capital-affiliated offshore funds in which Mitt Romney has invested his fortunes over the years. We’re still reading through the docs, though Dan Primack (who’s already read through them) thinks there’s not much to the issue. Read more
From the New York Times, a Gretchen Morgenson report into an apparently widespread practice of Wall Street analysts giving private equity clients and hedge funds a heads up into their thinking, via the hedgies’ monthly or quarterly “questionnaires”:
The funds say they ask only for public information, but in at least four cases, documents from Barclays Global Investors, now a unit of BlackRock, state the goal is to receive nonpublic information. Two documents state that the surveys allow for front-running analyst recommendations. Read more
From an engaging speech by Robert Jenkins — former F&C chairman, now a member of the Bank of England’s interim Financial Policy Committee — to the “trillion dollar generation” of hedgies at the Gaim conference in Monaco…
My third and final observation is that the days of instant market pricing and limitless liquidity may be fading. The “great moderation” conditioned many to underestimate credit risk. It also bred a generation of traders, money managers, bankers and risk officers to presume an unfettered flow of capital and instant access to narrow bid/offer spreads. Those of you who operate in less liquid instruments do not need reminding. You deal with it daily. Those of you who traded asset backed securities in 2008 can testify to the speed with which liquidity can disappear. Yet despite these examples, many continue to assume that at the currently liquid end of the trading security spectrum “liquidity” is free and will be freely available. Short term traders count on it; algo-trading depends on it. Long/short strategies presume you can short. Stop-loss disciplines demand you can cover – and cover quickly. Read more
One other thing from Wednesday’s SocGen Hedge Fund Watch that’s worth noting, especially given the ECB’s decision to hold rates steady earlier today:
From the latest SocGen Hedge Fund Watch, this is new:
Three Alphavillans are running around Canary Wharf in East London this evening in support of the British Heart Foundation.
Left to right: Lisa Pollack, David Keohane and Masa Serdarevic Read more
Five months in and it’s been a pretty good year for hedge funds with the HFRI fund weighted composite index up 4.4 per cent year to date, following its strongest first quarter performance since 2006. The index fell 5.25 per cent last year.
There was a small 0.36 per cent fall last month, but it’s unlikely to deter investors who have been scrambling to take advantage of the strong start to the year. Total hedge fund capital reached a dizzying record $2.13tn at the end of last quarter on a mix of performance and net inflows, according to Hedge Fund Research estimates. Read more
There are a few familiar City faces in the list of Conservative party donors who have “privately” dined with the Prime Minister at No 10…
(H/T the New Statesman) Read more
Greece has moved a step closer to completing its debt restructuring after a raft of bondholders agreed to participate in its upcoming debt restructuring swap, likely enabling the troubled nation to force the deal through, the Wall Street Journal reports. As of late Wednesday, about 52 per cent of the €206bn in bonds up for restructuring had been pledged. Reuters reports that major banks and pension funds have now also thrown their weight behind Greece’s bond swap offer to private investors, making it increasingly likely that the deal will pass, averting an immediate default. “The pace of responses to the bond offer is good, the percentage of bondholders tendering voluntarily is very high,” a government official, who spoke on condition of anonymity, told Reuters. “It is going well, we are optimistic,” he said. Some hedge funds and several Greek pension funds are still holding out, however, reports the FT. Shares in Europe, nevertheless, were still lifted by the progress. Read more
Two of the biggest US stock exchanges are set to impose penalties on high-frequency traders who clog the markets’ data pipes with unnecessary messages that do not result in trades, the FT reports. This move comes as Mary Schapiro, head of the Securities and Exchange Commission, recently expressed worries that such activity might be disruptive to markets. Nasdaq and Direct Edge on Wednesday announced schemes designed to promote more efficient trading by automated traders using sophisticated algorithms. Such “algos” send bursts of quotes that are then cancelled or replaced with new quotes in milliseconds once they figure out the market’s direction. This follows similar moves earlier this month by European stock exchange groups Deutsche Börseand Borsa Italiana. The other big US exchanges, New York Stock Exchange and BATS, have incentives in place for efficient trading in stocks listed on their markets, but do not yet have similar penalties. Read more
Ray Dalio has overtaken George Soros as the world’s most successful hedge fund manager after his Bridgewater Pure Alpha fund made $13.8bn for investors last year, says the FT. The profits made by the Connecticut-based Pure Alpha – already the world’s biggest hedge fund, with $72bn under management using its trading strategy – beat its own record for the largest one-year dollar gain last year. However, the ranking by LCH Investments, part of the Edmund de Rothschild group, also showed last year the biggest-ever loss by a hedge fund. John Paulson’s New York-based Paulson & Co lost investors $9.6bn last year, more than was lost in the collapse of Long Term Capital Management in 1998. But Mr Paulson is still ranked third for the best overall returns for investors, at $22.6bn. Read more
Michael Douglas is playing a new and unlikely role as spokesman for the US Federal Bureau of Investigation in its war against corruption on Wall Street, the FT reports. The Hollywood actor – famous for his line “greed is good” in the 1987 film Wall Street – is sending a new message in a public service announcement, telling traders and brokers that insider trading is a serious crime. The FBI’s New York office, which prioritises white-collar crime, hopes the 60-second segment will reach traders and hedge fund portfolio managers who might be tempted to cross the line between trading on legal stock research and trading illegally on secretive non-public information. The WSJ reports that federal authorities are currently pursuing insider trading cases against 120 individuals. Since late 2009, prosecutors have won 57 convictions or guilty pleas out of the 66 individuals that have had cases bought against them. Read more
President Barack Obama and Mitt Romney, his most likely Republican rival in this year’s election, battled for the mantle of tax reformer as they released competing visions for comprehensive reform, the FT reports. Mr Obama set out a plan that could change where global companies choose to invest by cutting the US corporate tax rate from 35 to 28 per cent, imposing a minimum tax on profits US companies earn in offshore tax havens, and eliminating tax breaks except for manufacturing and research. He also wants to raise billions of dollars via a “Buffett rule” that would mean people making more than $1m a year have to pay a minimum of 30 per cent of their income in tax, but he has not set out a detailed plan for personal tax reform. In a move that may increase his appeal to conservative Republican primary voters, Mr Romney proposed aggressive cuts to personal income tax rates, calling for a one-fifth reduction in each of today’s marginal rates. The new rates would range from 8 to 28 per cent. Read more
LONDON—World-renowned news and opinion magazine The Economist announced plans to suspend any new online and print content for the next month in an effort to finally allow subscribers a chance to catch up. “It’s only fair to our readers,” said Economist editor Winthrop Parker, adding that there was no reason for subscribers to feel ashamed for not necessarily knowing every last detail about the current economic and geopolitical climate.
Unfortunately, it isn’t true — the above is from The Onion. Read more
From an old New Yorker story on Daniel Loeb: Read more
John Paulson, the billionaire investor, has taken public his efforts to get The Hartford Financial Services Group to split into two companies, says the FT. The Hartford, like other insurers, has been under pressure in its life insurance business as interest rates hover near zero, making it difficult to generate the income to cover pay-outs on products like annuities. At the same time, it has participated in an industry-wide increase in pricing in its separate property and casualty business to make up for disaster-related losses last year. Mr Paulson, the largest shareholder in The Hartford with an 8.4 per cent stake, published a letter to the company on Tuesdayblaming its underperformance on the combination of its two businesses. He said it is too complex for analysts to properly value and that most other insurers have chosen to focus on one or the other business. Meanwhile Bloomberg reports Mr Paulson sold his entire stakes in Citigroup and Bank of America in the fourth quarter before the shares rallied. Paulson & Co, which owned $643m worth of Citigroup at the end of the third quarter, had sold its entire 25.1m shares as of December 31, the firm said on Tuesday in a filing with the SEC. He also sold $394m worth of Bank of America, or 64.3m shares. It also sold its 998,900 shares of BlackRock valued at $146m. Read more
Leading hedge funds have profited heavily from a rally in European banking stocks in recent weeks and are wagering that their gains will continue amid fresh measures to inject liquidity into the financial system from central banks, says the FT. This year has seen some of the strongest performance numbers from equity-focused hedge fund managers since 2009. The average equity long/short hedge fund returned 3.8 per cent in January and is provisionally up 1.6 per cent for February, according to Hedge Fund Research. Bets in banks such as Italy’s UniCredit, Spain’s Santander and the UK’s Barclays have made some hedge funds millions. Among big hedge fund gainers in the past six weeks have been Toscafund, run by the former Tiger Management star trader Martin Hughes, which has seen its flagship fund gain 7 per cent. A more specialist fund run by Mr Hughes himself is up more than 18 per cent. Crispin Odey’s flagship European hedge fund rose 14.7 per cent in January alone while Lansdowne Partners saw its flagship UK fund rise 5.7 per cent. Fund managers are unequivocal that it has been the European Central Bank’s Long Term Refinancing Operations lie behind their gains. Read more
You’ll have to imagine how it sounded.
But here’s an interesting demonstration of John Paulson at work… stepping onto Hartford Financial’s earnings conference call to lambast the insurer’s performance. Shares in Hartford dropped 39 per cent last year. Paulson’s the biggest holder. Read more
Elsewhere on Thursday,
- No, banks shouldn’t be in the tail risk-selling business. Read more
The commodities hedge fund industry has suffered its worst year in more than a decade as the sector’s top managers recorded heavy losses amid volatile markets, the FT reports. The average commodity hedge fund fell 1.7 per cent in 2011, according to a closely watched index compiled by Newedge, the first loss since the index was created in 2000 and down from a rise of 10.7 per cent in 2010. The drop came as multibillion-dollar commodities hedge funds such as Blenheim, Clive Capital, BlueGold and Merchant posted double-digit losses for the year. The Reuters-Jefferies CRB index, a basket of commodities, fell 8.3 per cent during the year, weighed down by falling prices for metals and agricultural raw materials.
Deutsche Bank is preparing to launch a fund to snap up investors’ illiquid or damaged holdings in hedge funds that have failed to recover since the financial crisis, the FT reports, citing people familiar with the launch. The fund, which Deutsche is launching in partnership with New York-based Rosebrook Capital, will set out to raise $500m The bank estimates that, three years after the collapse of Lehman Brothers, investors are sitting on between $80bn and $100bn of hard-to-sell hedge fund assets that could prove lucrative in the coming years. Big opportunities are being created by financial regulations such as Basel II and Solvency III, which are making banks and insurance companies forced sellers of problem assets. Read more
Elsewhere on Friday,
- The high yield ETF is really, really popular. Read more
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”…
David Einhorn’s personal £3.6m ($5.6m) fine from the UK’s FSA for market abuse amounts to the second largest individual penalty for in the regulator’s history, and finally gives it a high-profile scalp, the FT says. Few US hedge fund managers come more high-profile than Einhorn, who often seeks publicity for controversial shorts, reports the WSJ. In a conference call with investors in his Greenlight Capital fund, Einhorn disputed the FSA’s ruling. “This is like a traffic cop with a quota at the end of the month, with a faulty radar detector,” he said, according to Dealbreaker. Read more
Elsewhere on Thursday,
- The internet Web: French. Read more
David Einhorn, one of the world’s highest profile hedge fund managers, and his firm, Greenlight Capital, have been fined £7.2m by UK regulators for trading ahead of a 2009 equity fundraising by Punch Taverns, the FT reports. Mr Einhorn, who will personally pay £3.6m, is the most prominent figure to be ensnared by the UK Financial Services Authority, which has traditionally lagged behind US enforcers in tackling market abuse. His fine is the second largest ever handed down by the FSA to an individual for market abuse and will send a chill through the City. The case is a key step in the FSA’s campaign to hold market professionals to account and to tackle the high rates of suspicious trading ahead of mergers and rights issues. The WSJ says it represents a rare instance when a hedge-fund manager is personally held responsible for allegedly improper trading.
This document had previously passed this correspondent by: DP12/1 - Implementation of the Alternative Investment Fund Managers Directive. H/T Sarah Butcher.