Archive for the ‘Daily News’ Category
Friday, January 4th, 2013
LONDON (Reuters)â€”If the opening salvos of 2013 tell investors anything, it’s to keep their eyes fixed on the world’s central banks rather than its more volatile politicians or even spluttering economies.
Given the U.S. Federal Reserve’s latest musings on Thursday [Jan. 3] about how long it can safely sustain its current super-easy monetary policy, that’s not as unambiguously positive as it proved over the past 18 months.
Just a look at the jump in 10-year Treasury borrowing rates to 8-month highs early on Friday [Jan. 4] gives a glimpse into what might happen if dissenting views within the Fed spread when jobless rates ease closer to its now stated target of 6.5 percent.
An unchanged U.S. unemployment rate of 7.8 percent in December may suggest that’s a story for another time, but the episode does underline that central bank policy more than any other factor will continue to dominate global markets’ direction for the foreseeable future.
Relentless bouts of global monetary support via money printing, bond buying, cheap central bank loans and currency market intervention overwhelmed stock and bond markets everywhere in 2012 to lend a decidedly bullish hue to markets otherwise still riven by fiscal, political and economic stress.
If you’d ignored pretty much everything else last year and bet solely on the determination of the “Big 4″ central banks â€” the Fed, European Central Bank, Bank of Japan and Bank of England â€” to doggedly pursue market stability and economic reflation, then you’d have done handsomely.
Put another way, it was simply the hoary old adage of “Don’t fight the Fed” â€” or more accurately, and perhaps more ominously: “Don’t fight the Fed, ECB, BoJ and BoE’.”
“The Fed, the ECB and the BoJ are more aggressive with their QE (quantitative easing) operations than at any time in history,” said Stephen Jen, head of eponymous hedge fund SLJ Macro and long-standing skeptic on the efficacy of central bank money printing. “Even I am turning more optimistic, but still cautiously so,” he told clients earlier this week. “The path of least resistance for risk assets remains up for now.”
Something For Everyone
You didn’t have to be terribly discriminating last year in what assets you chose or even have a firm conviction on the long-term success of the extraordinary central bank activity.
The broadest measures of both developed and emerging stock markets as well as both investment-grade and “junk” bonds all returned 10 to 20 percent last year. And even the so-called safe havens of U.S. and German government bonds and gold got swept up in the slipstream, returning at least 5 to 10 percent too.
Only if you were still stuck in cash, where real losses in U.S. dollar bills over the last three years have been bigger than even the 1970s, would you have continued to bleed money.
Within the hedge fund universe, those funds looking at basic value and growth strategies or emerging market plays significantly outperformed the typically more tactical and nimble macro funds or the often model-based trend followers. Yet this “something for everyone” asset market upshot is the clearest illustration of the overpowering influence of central bank intervention and one that unnerves many skeptics â€” if only on the crude but sensible assumption that central banks won’t intervene forever.
And ironically, it’s the emergence of the long-desired recovery and reflation that may cause the biggest ructions.
By hastening the end of QE-related bond buying, a pickup in growth and job creation could at once boost government borrowing rates and debt servicing bills, tighten mortgage credit and narrow the perceived undervaluation of equity, drawing even the wariest funds back to stocks. Even though the New Year’s Eve budget compromise between Washington’s warring factions was widely panned by economists as an unsatisfactory short-term fix, global stock markets greeted the swerve from the “fiscal cliff” with the biggest one-day rally in six months.
The calculation, not unlike the past two years of euro sovereign debt crises, has been that if the politicians can at least avoid a near-term disaster, then the central banks will keep everything afloat until a resolution emerges eventually.
For good or ill, the revelation of the internal Fed debate on Thursday therefore packs a punch. Yet many traders reckon this is still not a dominant story until 2014. What’s more, while the ECB may also be a third of the way through its three-year cheap loan spree to its banks, the bloc is also still in recession and there’s at least two years to that payback. The Bank of Japan is even preparing to ramp up its yen-weakening QE after election pledges made by the incoming government of Shinzo Abe.
So, don’t fight the central banks â€” either way they go â€” but the status quo may prevail for while longer yet.
“Global markets are temporarily over-panicking about the Fed’s FOMC minutes and the suggestion that at some point, some normalization of Fed’s monetary policy will be necessary. Sorry, but I knew that,” said SociÃ©tÃ© GÃ©nÃ©rale’s emerging markets strategist Benoit Anne. “Is the Fed going to maintain an accommodative bias in the period ahead? For sure, yes. From this standpoint, I am going to start being nervous when it is time to consider a major retrenchment of global liquidity. This is way too soon to worry about that.”
By Mike Dolan
Friday, January 4th, 2013
BOSTON/NEW YORK (Reuters)â€”Widely followed hedge fund managers Daniel Loeb and David Einhorn ended the year on divergent notes with Mr. Loeb’s firm handily beating the broader stock market and Mr. Einhorn’s firm posting a modest single-digit annual gain after performing poorly in December.
For Mr. Einhorn, who has moved stock prices by simply opening his mouth, 2012 ended with lackluster returns when his Greenlight Capital lost 2.8 percent in December, a person familiar with the fund’s performance said.
Thanks to losses on computer maker and market darling Apple Inc. and in the gold market, Mr. Einhorn’s investors saw their once healthy double-digit gain shrivel late in the year to leave Greenlight Capital with an 8.3 percent increase for 2012.
Mr. Einhorn is among a handful of particularly committed Apple investors; he mentioned the company as a favorite pick in May and has told investors that he expected the stock price to hit $700, which it did very briefly in September. In the last three months, however, the price has tumbled about 20 percent and is currently trading at around $531.
With his annual return, Mr. Einhorn lagged the broader stock market where the S&P 500 index ended the year with a 13.4 percent gain, excluding dividends. The average global hedge fund gained only 3.17 percent, according to data from Hedge Fund Research.
The disappointing end of the year performance at Greenlight Capital illustrates how even a highly influential manager like Mr. Einhorn, who has enjoyed something of a cult following in the $2 trillion hedge fund industry ever since his bearish call on Lehman Brothers in early 2008, can stumble.
For much of the year speculation mounted over which stocks Mr. Einhorn would pick or pan with General Motors and Marvell Technology Group getting the thumbs up from the manager. But Marvell’s stock price tumbled at the end of the year after it was ordered to pay $1.17 billion to settle a patent infringement lawsuit likely costing Greenlight Capital millions in losses.
A spokesman for Mr. Einhorn declined to comment.
At the same time, Mr. Einhorn clearly failed to cash in on supplements company Herbalife where his probing questions on a conference call in May sent the company’s share price tumbling and fanned widespread talk that he might be preparing to short the stock price.
But in the end it was William Ackman’s Pershing Square Capital Management that unveiled its own big short against Herbalife in late December, helping salvage an otherwise lackluster year for the $11 billion fund. Pershing Square gained 5.8 percent in December to end the year up 12.4 percent, an investor in the fund said.
In 2011, it was Mr. Einhorn who got a big boost from having said very publicly in October that he was shorting Green Mountain Coffee Roasters. The ensuing plunge in Green Mountain shares helped Greenlight end 2011 up 3 percent, after being in negative territory for much of 2011.
Meanwhile, Mr. Loeb, known for his sharp tongue and muscle in trying to get some big U.S. companies to shape up their business, had another stellar year, investors in his $9.3 billion firm said.
His Third Point Ultra fund, which uses borrowed money to boost returns, delivered a 33.6 percent gain for the year after climbing 5.4 percent in December. His Third Point Offshore fund gained 21.1 percent after rising 3.6 percent in December.
While Mr. Loeb was also hurt by a drop in the price of Apple and gold, he more than made up for it with savvy bets on Greek government bonds and Yahoo. He told investors in October that he had scooped up certain Greek government bonds for about 17 cents on the dollar, which were part of a so-called “strip” of 20 newly issued bonds that mostly trade bundled together. Mr. Loeb said the market was mistakenly pricing the debt to reflect a Greek exit from the euro zone currency area, something Loeb thought was unlikely and something which has not happened.
Third Point was not available for comment.
Even as many managers are still compiling their 2012 numbers, some hedge fund investors have characterized the year as largely subpar with only a handful of big-name managers able to deliver the kind of outsized returns that made the industry famous.
Activist investing strategies, as pursued by Mr. Ackman’s Pershing Square and Barry Rosenstein’s JANA Partners, were among the industry’s biggest winners. JANA’s Nirvana Fund gained 33.3 percent for the year while its JANA Partners fund returned 23.2 percent, an investor in the fund said.
Also, veteran stock picker Leon Cooperman’s Omega Advisors, turned out of its downtown Manhattan offices for weeks by Hurricane Sandy, delivered strong returns with a net return of 26 percent, a person invested with Omega said.
Kenneth Griffin’s $14 billion Citadel told investors that its flagship Wellington multi-strategy fund gained 3.4 percent in December to end the year up 25.5 percent, someone familiar with the portfolio said.
Steven Cohen’s SAC Capital Advisors, with $14 billion under management and long known for its strong and steady returns, ended the year up 12 percent, people familiar with the portfolio said. Och-Ziff Capital Management, a $32 billion favorite with pension funds and governments, reported that its Master Fund climbed 11.18 percent last year.
By Svea Herbst-Bayliss and Matthew Goldstein
Friday, January 4th, 2013
LONDON (Reuters)â€”Hedge fund manager Patrick Armstrong is backing his confidence in the technology and luxury goods sectors by buying shares in Apple and holding his positions in the likes of LVMH and BMW.
Mr. Armstrong, who co-manages $220 million as head of investment selection at Armstrong Investment Managers, believes that such companies will help to drive the S&P 500 and other stock markets to new highs in 2013, aided by central banks’ pro-growth policies and fast-growing emerging markets.
“Some equity markets, including the S&P 500, will reach their all-time highs (in 2013),” the former co-head of Insight Investment’s $2 billion multi-asset group said in a statement.
Technology companies are expected to flourish in emerging markets. In India, for example, sales of tablet computers are expected to at least double this year to six million, research firm CyberMedia said on Friday [Jan. 4].
Armstrong’s Diversified Dynamic Solution fund returned 8 percent in the first 11 months of last year, against a hedge fund industry average of 3.17 percent in the year to Dec. 28, Hedge Fund Research data shows. His fund lost 0.2 percent in 2011 but made 12.3 percent in 2010 and 31.3 percent in 2009.
The 41-year-old’s bullishness on stocks echoes that of other hedge fund managers, many of whom have turned positive as a result of action by central banks to prop up economies and boost growth. The European Central Bank, for instance, promised in September to do whatever it takes to protect the euro zone.
The consensus forecast among equity strategists in a Reuters poll in December was for the S&P 500 to finish 2013 close to the record high of 1,576.09 recorded in October 2007. The index, which rose 13.4 percent last year, was up 0.23 percent at 1462.75 at 3:29 p.m. GMT on Friday.
However, some commentators believe that stock markets could be hit by continuing recession in the euro zone and further budget wrangling between President Barack Obama and Congressional Republicans in the United States.
Mr. Armstrong told Reuters he had been buying shares in Apple and British chip designer ARM during December.
Apple’s iPhone and iPad products helped to propel its shares to a record high of $705.07 on Sept. 21, but the price fell to a little more than $500 last month after analysts cut shipment forecasts on concerns over competition from phones using Google’s Android operating system. At 3:29 p.m. GMT, the shares were down 2.4 percent at $529.21.
On Wednesday [Jan. 3], Leon Cooperman, CEO of hedge fund Omega Advisors, said he is optimistic about stock markets this year, while bonds are in a “bubble.” Mr. Cooperman said he owns shares in Apple, despite being wary of the company’s hoarding of cash on its balance sheet.
Mr. Armstrong said he likes companies offering high growth, and that he is also holding on to positions in luxury goods companies such as L’Oreal, LVMH and BMW.
“We prefer to pay premium multiple(s) to get premium growth â€” (we’re) not convinced (by the) margins and growth of the staple companies,” he said.
He has started shorting consumer staples stocks Nestle, Unilever and Procter & Gamble. Shorting is the selling of stock you have borrowed in the hope of buying it at a lower price later to complete the trade, thereby profiting from falling prices.
He also said that 2013 “will mark the beginning of a bear market for government and high-grade corporate bonds, which will run throughout the remainder of the decade.”
Mr. Armstrong expects investors to move out of expensive government bonds into higher-yielding equities and said that he is shorting French and German government bonds.
By Laurence Fletcher
Friday, January 4th, 2013
WASHINGTON (Reuters)â€”The U.S. securities regulator has decided not to take action against David Sokol, once considered a possible candidate for the top job at Warren Buffett’s Berkshire Hathaway Inc., Mr. Sokol’s lawyer told Reuters.
In 2011, Mr. Buffett said Mr. Sokol violated the company’s insider trading rules to score a $3 million windfall profit on shares of U.S. chemicals maker Lubrizol, which rose by nearly a third after Berkshire Hathaway announced it would buy the company. The U.S. Securities and Exchange Commission began investigating Mr. Sokol’s investment in Lubrizol shortly after he resigned from Berkshire Hathaway.
Mr. Sokol’s lawyer, Barry Wm. Levine, told Reuters late on Thursday [Jan. 3] that he was informed that the SEC had wrapped up its probe and decided not to take action against Mr. Sokol.
“SEC has terminated its investigation and has concluded not to bring any proceedings against Sokol,” said Mr. Levine, a lawyer at the legal firm Dickstein Shapiro.
Mr. Sokol has been “completely cleared” as there was no evidence against his client, Mr. Levine added.
Berkshire Hathaway and SEC could not immediately be reached for comment by Reuters outside of regular U.S. business hours.
Mr. Buffett surprised many when he said Mr. Sokol had violated insider trading rules by failing to disclose his purchase of Lubrizol shares, less than four weeks after starting talks with Citigroup Inc. bankers on acquiring all the shares in the chemicals company that Berkshire Hathaway did not already own.
Mr. Sokol, who once chaired Berkshire Hathaway’s MidAmerican Energy unit, ran its NetJets plane leasing unit, and was a top Warren Buffett deal-maker. He was considered a leading contender to succeed Mr. Buffett as Berkshire Hathaway’s chief executive.
Mr. Buffett told investors last year that Berkshire Hathaway’s board has identified his successor, easing some shareholder concern about the future of the company once the famed investor steps down as chief executive.
Mr. Buffett, however, did not disclose who the next CEO will be in his annual letter to Berkshire Hathaway shareholders last year.
By Sakthi Prasad in Bangalore
Friday, December 28th, 2012
FRANKFURT, Germany (Reuters)â€”Austrian bank Bawag PSK is getting a â‚¬200 million ($264.42 million) capital injection from shareholders and investors, boosting its core equity ratio around 10.3 percent by end of this year from 7.8 percent last year, it said on Friday [Dec. 28].
Under the deal, private equity firm Cerberus Capital Management will remain the controlling shareholder, owning around 52 percent stake, while U.S. hedge fund Golden Tree Asset Management will hold around 39 percent interest, it said.
Austria’s competition regulator said on Dec. 12 it planned to allow Golden Tree to raise its stake in Bawag PSK to up to 40 percent from almost 10 percent.
By Marilyn Gerlach
Friday, December 28th, 2012
BERLIN (Reuters)â€”Back in May, as the euro zone veered deeper into crisis, Nobel Prize-winning economist Paul Krugman penned one of his gloomiest columns about the single currency, a piece in The New York Times entitled “Apocalypse Fairly Soon.”
“Suddenly, it has become easy to see how the euro â€” that grand, flawed experiment in monetary union without political union â€” could come apart at the seams,” Mr. Krugman wrote. “We’re not talking about a distant prospect, either. Things could fall apart with stunning speed, in a matter of months, not years.”
Mr. Krugman was far from being alone in predicting imminent doom for the euro in 2012. Billionaire investor George Soros told a conference in Italy in early June that Germany had a mere three-month window to avert European disaster.
Then in July, Willem Buiter, chief economist at Citigroup and former Bank of England policymaker, raised the probability that Greece would leave the euro to 90 percent, even going so far as to provide a date on which it might occur. Mr. Buiter’s D-Day â€” Jan. 1 â€” falls next week.
And yet no one now believes a “Grexit,” or catastrophic implosion of the euro zone for that matter, is just around the corner.
Half a year ago the chorus calling an end to the euro reached a crescendo. Among the chief doom-mongers were some of the world’s leading economists and investors, many of them based in the United States.
Fast forward six months and their prophecies look ill-judged, or premature at the least. The euro has rebounded against the U.S. dollar. The bond yields of stricken countries like Greece, Spain and Italy â€” a market gauge of how risky these countries are â€” have fallen back.
Even the gloomiest of the gloomy are revising their forecasts, although they warn of more trouble ahead.
“Europe has surprised me with its political resilience,” Mr. Krugman admitted earlier this month in a blog post.
In October, Citi lowered its view on the likelihood of Greece exiting the currency area within 18 months to a still high 60 percent and there are plenty of economists who think that while a patchwork of measures have drawn some sting out of the crisis they have done little to address its root causes.
Messrs. Krugman and Buiter did not return mails seeking comment. Mr. Soros declined to be interviewed.
With the benefit of hindsight, it seems clear that many simply underestimated the political will in Europe to keep the euro together, and the impact that a series of policy shifts in the second half of 2012 would have on sentiment.
The most important of these were European Central Bank President Mario Draghi’s July promise to do “whatever it takes” to defend the euro â€” which led to the ECB’s commitment to buy euro zone government bonds in sufficient amounts to shore up the currency bloc â€” and German Chancellor Angela Merkel’s late summer shift on Greece. After wavering for many months on the costs and benefits of a Greek exit, she finally came around to the view that the risks to Europe and her own political prospects of letting Greece go were far too great.
“There may be a logic to Greece leaving, but the mechanics are too disruptive for both Greece and its neighbors,” said Barry Eichengreen, an economist at the University of California, Berkeley, who has long argued that the euro is irreversible.
“An appreciation of European politics makes you realize that everything will be done to prevent a breakup of the monetary union. It would be intensely catastrophic, economically and politically,” Mr. Eichengreen said.
Capital Economics, a U.K.-based consultancy that forecast one or more countries would leave the single currency bloc by the end of 2012, now concedes that it underestimated the ECB’s determination to save the euro and the market’s faith in the bank’s promises.
“It may simply take longer,” Jennifer McKeown, senior European economist at Capital Economics said of a euro breakup. “It’s obviously not happening this year.”
Prominent investors have also paid a price for betting against the euro zone this year. Earlier this month celebrated U.S. hedge fund manager John Paulson blamed big losses suffered in 2012 on his bets that the sovereign debt crisis would worsen.
For those who placed their chips on the other side of the table, there were stellar returns of around 80 percent to be had on 10-year Greek and Portuguese government bonds this year.
Nouriel Roubini, the New York University economist whose bearish forecasts earned him the nickname “Dr. Doom,” has been in the gloom camp from the beginning, predicting as far back as 2010 that countries would be forced to abandon the single currency. Now he says the risks of a near-term catastrophe have been reduced.
Reflecting the more cautious view of many of his colleagues, Mr. Roubini believes 2013 will be another year in which European politicians “muddle through,” avoiding catastrophe. But the euro’s day of reckoning will come, he believes, with the risks metastasizing over the course of 2013 and Greece, once again, posing the biggest threat.
At the height of the crisis in June, the euro zone dodged a bullet when the conservative party New Democracy narrowly beat anti-bailout leftists SYRIZA in the Greek election. Since then, Greek Prime Minister Antonis Samaras has been able to keep his three-party coalition together, and behind austerity measures needed to keep bailout money flowing. But as the country enters its sixth year of recession and support for the government wanes, his task will become harder. Recent opinion polls show SYRIZA with a five point edge, underscoring the risks of a political earthquake in Athens at some point in 2013.
“By late fall of next year, the Greek coalition could collapse and an exit may be back on the table,” Mr. Roubini told Reuters.
Even economists like Mr. Eichengreen are reluctant to declare the worst of the crisis over, pointing to deep recessions on Europe’s periphery and the risk of political complacency.
At a December summit in Brussels, European governments delayed serious discussion on closer fiscal integration until mid-2013 and made clear that creation of a “banking union” would stretch into 2014 and beyond.
“What we have seen throughout this crisis is a cycle where steps are taken, politicians think the problems are solved, they sit on their hands and the situation worsens again, with spreads blowing out. I’m sure we’ll see more of this going forward,” Mr. Eichengreen said.
Mr. Krugman, while expressing surprise at Europe’s ability to avert disaster in 2012, isn’t backing off his predictions of gloom either. In his recent blog post “Bleeding Europe,” he likens the austerity imposed on countries like Greece, Portugal, Spain and Ireland to “medieval medicine” in which patients were bled to treat their ailments. When the bleeding made them sicker, they were bled some more.
Even if the euro has defied forecasts of its demise, the economics of austerity, Mr. Krugman says, are playing out “exactly according to script.”
By Noah Barkin
Friday, December 28th, 2012
NEW YORK (Reuters)â€”One of hedge fund billionaire Steven A. Cohen’s largest outside investors, private equity firm Blackstone Group LP, appears inclined to keep its money with his SAC Capital Advisors, even as the U.S. government scrutinizes the fund in its ongoing insider trading probe.
Three sources said the asset management arm of Blackstone , which has $550 million invested with SAC Capital, is in no rush to redeem money from the Stamford, Conn.-based hedge fund. Blackstone has had at least three discussions with the $14 billion hedge fund’s executives about the insider trading investigation and talked to its own investors, which include state pension funds, endowments and wealthy individuals.
Seven current and former SAC employees have been charged or implicated in the insider trading probe into hedge funds and their sources of trading tips, and the firm itself â€” along with the 56-year-old Mr. Cohen â€” has been drawing renewed scrutiny.
“I am unaware of any representation by Blackstone that they are pulling out,” said Robert Klausner, a Florida attorney who represents a pension fund from Louisiana that is an investor in a Blackstone fund with money at SAC Capital.
A Blackstone spokesman and an SAC Capital spokesman both declined to comment.
Outside investors in SAC Capital, who can redeem four times a year, have until the middle of February to decide whether to pull out some money. So officials at Blackstone, which accounts for about 9 percent of the outside money invested in SAC Capital, could still change their view on the hedge fund in the event of a new development in the insider trading investigation.
Already Titan Advisors LLC has notified SAC Capital it intends to pull money from the hedge fund. Titan, which invests $3 billion of client money in more than 20 hedge funds, is one of Cohen’s longest tenured outside investors. It’s not known how much money Titan, which did not return a request for comment, has invested with SAC Capital.
The question of investor redemptions from SAC Capital has come up in the wake of charges brought last month by U.S. authorities against a former SAC Capital portfolio manager, Mathew Martoma. He is accused of using inside information to generate profits and avoid losses totaling $276 million in shares of two drug stocks, Elan Corp. PLC and Wyeth.
In a sign U.S. authorities are ratcheting up the pressure on Mr. Cohen, the Securities and Exchange Commission recently warned SAC Capital that the firm could face civil charges over the Martoma matter. Federal authorities also have expanded their investigation to look into trading by the hedge fund in shares of Weight Watchers International Inc and biotech company InterMune Inc.
Blackstone, whose chairman and chief executive is financier Stephen Schwarzman, is seen by some as something of a bellwether investor in the $2 trillion hedge fund industry because its popular so-called hedge fund of funds invests with more than four dozen hedge funds, including SAC Capital, Pershing Square Capital Management, Elliott Management and D.E. Shaw & Co., according to people familiar with the private equity firm’s asset management business.
Blackstone’s $550 million investment in SAC Capital is a big slice of the $6.3 billion in assets that SAC Capital manages for its outside investors, said sources familiar with SAC Capital and Blackstone. Roughly 55 percent of the dollars invested in SAC Capital is Mr. Cohen’s own personal fortune and money from his employees.
Don Steinbrugge, chairman of Agecroft Partners, a hedge fund consulting and marketing firm, said most institutional investors that have money with SAC Capital will make their own decision on whether to remain with the fund. But he said some investors “will look to leaders in the industry to help guide them.”
Mr. Klausner said an investment adviser hired by the Louisiana pension fund he represents said it is comfortable with Blackstone’s decision to stay with SAC Capital after doing its own research into the matter. Mr. Klausner said the decision by SAC Capital to pick up the tab for any legal costs and fines that might be levied by authorities against the hedge fund, gave his pension client comfort.
“The indemnification was a huge deal and the fact that the principals of SAC own 55 percent of the firm,” he said.
Several other Blackstone investors said they also are comfortable with whatever decision the investment firm makes about keeping money in SAC Capital.
William Einhorn, administrator for the Teamsters Pension Trust Fund of Philadelphia and Vicinity, which has money in a Blackstone fund that invests with SAC Capital, said he last had a communication with Blackstone about the investigation two weeks ago and he is not telling the investment firm what to do.
“I am relying on the actions of our fiduciary,” Mr. Einhorn said.
He and other Blackstone investors said they generally have been satisfied with the performance of Blackstone’s hedge fund offerings.
So far this year one of the Blackstone funds that invests with SAC Capital, the $4.3 billion BPIF Partners Non-Taxable fund, is up about 7 percent, according to an investor source. By comparison, hedge funds on average are up 5 percent for the year and SAC Capital’s flagship fund is up a little over 10 percent.
Still, the decision by Titan to pull money out, which was first reported by The Wall Street Journal, was a little surprising to some given that the investment firm told its investors in a September 2012 investment letter that SAC Capital was one of its “biggest gainers” in the third quarter.
And in a December 2010 investor letter, Titan told its investors it was not redeeming from SAC Capital after determining that neither the firm nor its principals were “the target of the investigations.” At the time, Titan told investors it would continue to “closely monitor” the matter.
Marisel Lieberman, assistant director for FIU Foundation Inc., which invests in the Titan Masters International Fund, said she was recently informed by Titan that it “has since fully redeemed out of SAC funds.”
A copy of the Titan letter informing investors of the decision to redeem from SAC Capital could not be obtained.
By Matthew Goldstein
Friday, December 28th, 2012
TOKYO (Reuters)â€”Nippon Life Insurance and other Japanese financial heavyweights are scoring new business with corporate pension funds, recently burned by an investment adviser scandal and difficult domestic markets, by tailoring multi-asset funds to offer limited risk and steady returns.
Japan’s corporate pension funds, with more than Â¥70 trillion ($826 billion) in assets, are increasingly targeting minimum returns â€” typically 2.5 percent a year â€” instead of using relative performance benchmarks that for years have come up short as bond yields fell and equities markets remained volatile, pension fund sources and asset managers say.
Pension funds are also tending to shun smaller, independent asset managers and hedge funds, after a scandal over $1.3 billion in hidden losses at Tokyo-based independent asset manager AIJ Investment Advisors earlier this year.
This puts Japanese life insurers, trust banks, and big domestic and foreign asset managers in position to battle for new pension business, and multi-asset funds are proving an effective weapon.
“Multi-asset funds are increasingly gaining popularity among many pension funds that want to control their risks, while at the same time raise stable returns,” said Mitsuhiro Arakawa, an executive consultant at Russell Investments, a U.S.-based investment manager and pension fund consultant. “We’ve seen this growing trend in multi-asset funds over the past few years, although the lineup is getting bigger this year and this trend is expected to continue.”
Multi-asset funds had been a typical part of Japanese pension funds’ portfolios in the late 1990s and early 2000s, although declining returns encouraged them to take more direct control of their asset allocation decisions. Now the pendulum appears to be swinging back the other way.
“This new trend to buy multi-asset funds is just picking up. We need to see whether these funds actually perform well before more pension funds shift their money into that space,” said a senior corporate pension fund manager, who declined to be identified.
Nippon Life, Japan’s top life insurer, has a new multi-asset fund weighted heavily toward domestic debt, with about an 80 percent allocation, that aims for a 2.5 percent annual return. The fund, managed by Nissay Asset Management and also including foreign sovereign bonds and domestic and foreign equities, aims to attract about Â¥100 billion by the end of the year to next March, and Â¥300 billion within three years, said Masayoshi Tsuda, a Nissay Asset Management general manager.
The trust bank arm of Japan’s top lender Mitsubishi UFJ Financial Group also aims for a 2.5 percent return from a balanced fund it launched in October, which has attracted 12 pension funds and Â¥7.5 billion. It invests in conventional assets â€” domestic and foreign bonds and equities â€” as well as cash.
The trust bank unit of another big bank, Mizuho Financial Group, targets a more ambitious 4 percent return from a fund launched in September investing in conventional assets, emerging markets, and alternative assets, including gold and real estate investment trusts. It has gathered about Â¥15 billion so far from pension funds, said Kouji Shibata, senior portfolio manager at Mizuho Trust & Banking.
“Pension funds have been convinced, since these funds appear to offer realistic targets,” said Akihiko Ohwa, a veteran pension fund manager who now lectures at the Graduate School of Finance, Accounting and Law at Tokyo’s Waseda University.
Pension funds have been shunning risk since the 2008 Lehman crisis, shifting into fixed-income products from equities. Returns became increasingly meager, however, with the yield on the benchmark 10-year Japanese government bond holding near nine-year lows below 0.8 percent since the start of this quarter, although it has begun moving up on the prospects of aggressive policy measures to stimulate the economy.
Pension funds also remain wary of the domestic stock market, despite a 20 percent rally in Tokyo’s benchmark Nikkei average since mid-November as optimism rises that the new government of Shinzo Abe, who has pressured the Bank of Japan for easier monetary policy, can finally break Japan from decades of grinding deflation.
Mr. Ohwa said Japan’s pension funds remain keen to maintain or even lower the risk profiles of their portfolios as they focus on securing targeted returns, still smarting from the disappointing performance of Japanese equities for much of the past two decades.
By Chikafumi Hodo
Friday, December 14th, 2012
For several months hedge funds have been accused of luring top talent away from banks and other financial institutions. This is partially due to the fact that banks are not what they used to be; the salary, stability and bonus packages have greatly decreased. Hedge funds have been more than welcome to fill the void.
Thalius Hecksher, Global Head of Business Development at Apex Fund Services (an independent fund administrator), said that as the talent pool slips away from banks, it provides an “opportunity for Apex.”
“Top talent that has left banks is coming back to the market now, looking for new and alternative things to get involved in,” he said.
Apex recently opened a new office in Miami, Fla. “This is a small office,” said Vincent M. Sarullo, Managing Director of Apex Fund Services in the U.S. “We’re just starting out, and that’s how we grow our business globallyâ€”whenever we get into a new location, we start with an initial staffing and then grow as the business grows.”
Sarullo said that when he first arrived in Miami, Apex “had great assistance from the groups down thereâ€”the Chamber of Commerce and the FLAIA (Florida Alternative Investment Association)â€”[that helped us] make introductions into the universities in the area to attract staff, and it has been a wonderful experience.”
“We see that it’s definitely going to be an office that we will grow with quality staff,” he continued. “There are a lot of people that are graduating with finance and accounting degrees that don’t have an avenue to go and get hired. There’s not a lot of service providers that are hiring, so they’re looking to go and relocate and go to other places. Here I think we’ll have the pick of the litter of quality people coming from those universities to staff our office.”
Hecksher referred to the new Florida office as a “win-win” for everyone involved. “There’s a high-caliber of employment available in the Miami market,” he said. “In [the [past] they might have had to look outside of Florida for the right job, whereas we’ve opened a place locally. We’re giving the local students and graduates the opportunity to actually stay home and work in Florida for an international business.”
The branch may be small but Apex anticipates that it will grow in the not-too-distant future. When it does, Sarullo said that the company will look to fill “positions to perform the core job that we do.”
“So it will be accounting majors, finance majors, and then behind that of course the support staffâ€”administrative peopleâ€”to support the office function as it grows,” he said.
One of the challenges Apex faces in hiring fresh talent is that it is very different from other companies. “Even from the accounting standpoint, people coming out of college, or even in industry, it’s a unique business,” said Sarullo. “It’s a unique type of accounting function in that even those who have had a few years in the hedge fund industry in some shape or form, those coming in have to start with a lot of learning. There’s a huge learning curve in not just our systems and how we do things but our overall operations of what we do. From hedge funds to private equity to real estateâ€”we cover a lot of fund types and strategies within the alternative world.
“The thing that I value most in a candidate is their ability to demonstrate that they [know how to] think. Basically, a smart person who has the drive to learn more and add value and has a positive attitudeâ€”that is the most important thing to me.”
“We’re looking for folks who have good academics and a good background,” Hecksher added. “We also have folks who come up to us who basically demonstrate a very strong business aptitude. We want people on our staff to really understand the key objective of our client and their key strategies. We’re always thinking how we can better serve our clients. We look for entrepreneurialism and innovativeness in a [prospective hire].”
Further, Sarullo cited the differences between Apex and other administrators. “Our business approachâ€”from the operational sideâ€”is a little different from a lot of administrators in that, if you look at most (not all) admin shops, you have different departments that handle different aspects of the fund,” he explained. “The way we have our service model, [we provide] one point of content where each of our fund accountants has six to eight funds that they’re responsible for and they’re responsible for the entire world of that fund.
“They have in-depth knowledge about everything that’s going on with those funds, and they do spend a lot of face time with the manager and the clients, so there’s a very tight bond that’s built between them. They really view themselves more as an extension of that manager’s team and not just someone who’s doing a process. It gives them the ability to learn about those managers’ positives and also their pain points to see an opportunity and identify an opportunity to help that manager grow and to help them with any of the struggles that they may be having.”
This content originally appeared on StreetID, a financial career networking, matchmaking and news site. To learn more about StreetID, visit StreetID.com. StreetID’s financial career news can be found on its blog, streetid.com/newsblog/.
Friday, December 7th, 2012
Hedge funds are packing up and heading south. Is this a continuing trend or a brief part of the financial sector’s ongoing evolution?
Apex Fund Servicesâ€”one of the world’s largest independent fund administration companies with more than $20 billion of assets under administrationâ€”recently opened a new office in Miami, Fla. Vincent M. Sarullo, Managing Director of Apex Fund Services in the U.S., told StreetID that his company was drawn to the “significant growth in the south, specifically the South Florida region.”
“And more recently, in the past year or so, having a bigger move of managers from Latin America coming into the area and setting up shop and having a presence there, either to attract U.S. investors to invest in Latin America, or bring Latin American investors into the U.S. to take advantage of the U.S. markets,” he said. “After seeing that spike, we thought it was only a natural fit to place an office there and serve our clients in the south, whether it’s the Carolinas, Florida, Texas. It seemed to be the right fit.”
Thalius Hecksher, Global Head of Business Development at Apex Fund Services, believes that the trend will continue and more hedge fund managers will move to Florida.
“Already we are seeing a lot of momentum behind what Florida can offer hedge fund managers,” he said. “It’s a clear indicationâ€”a lot of the major private banking names are there right now, both North American and South American. Florida and Miami truly is a little bit of a hotspot. We definitely believe it’s the right place for Apex to be.”
Apex was particularly attracted to the “huge amount of economic development” going on in Latin America. “Brazil has the 2014 Soccer World Cup and the 2016 Olympics,” said Hecksher. “It really is making a lot of noise there. In addition to that, the Bahamas has realized that their fund structure has become very attractive to high-net worth individuals based out of Brazil. Again, with the Bahamas being on our doorstep, we’re definitely going to see an awful lot of flow coming our way.”
Hecksher said that one of the key drivers for Apex is that it functions on a push-and-pull philosophy where its clients “pull us into a territory and we’ll push ourselves in.”
“Over the last 18 to 20 months we’ve noticed that we have a couple clients there, and Vince took the view that we could better serve them more locally,” Hecksher explained. “As a result of that, we have also [gotten some managers on board] from Brazil and other Latin American countries.”
After conducting a number of business trips to Latin America, Hecksher learned that many Latin American hedge fund managers see Miami as the “meeting of the Americas, or a gateway for North America to South America.”
“Miami is actually well-positioned for Europe as a very strong hub,” he added. “So through Miami, you pretty much get to North America, South America, Asia to a certain extent, and also back to Europe. Thus, it made absolute sense for us to come to Miami.”
But it’s not just the worldwide gateway that attracts hedge fund managers. “There are also very low taxes here in Florida,” said Hecksher. “So we see these as incentives for managers to relocate their business to Florida. We see the opportunity and have decided to take an early adopter’s approach in Miami and demonstrate that we have taken the step to serve this market.”
“Also, in the past couple years we have been working with the Florida Alternative Investment Association,” Sarullo added. “We found that the association, plus the state, has been making a conscious effort to attract investment managers to the area, assisting them in making that move. One of the things that I kept on hearing was that the need to have an adequate supply of service providers who specialize in the industry in the area in order to serve these managers. There are a limited number of service providers in Florida that fill that need.”
Looking ahead, Sarullo thinks that the Florida lifestyle could inspire the formation of new funds.
“I think you might see as a byproduct of the retirement sideâ€”people going there later in lifeâ€”is that you’re gonna find a lot of asset managers that have been working in organizations for a long time,” said Sarullo. “[They] decide, ‘Well, I’m gonna cut back and retire or cut back my schedule,’ and go down there. Being the personality and nature of the people that they are, they’re gonna say, ‘You know what, I’m bored. I want to do something. I’m gonna go back to what I do and set up a small fund here.’”
“I imagine Miami will work as a launching pad for our next emerging market when we choose to launch another office,” Hecksher added. “It will, more than likely, be somewhere in the Latin American market. So it works for us as a very good hub and a very good foundation for managers.”
This content originally appeared on StreetID, a financial career networking, matchmaking and news site. To learn more about StreetID, visit StreetID.com. StreetID’s financial career news can be found on its blog, streetid.com/newsblog/.