Due to the technical glitches we experienced on Dec. 28, we’re posting an extra set of performance charts today. Here we take a look at November 2012 absolute performance for the top 5 global macro funds in two categories - all funds and U.S.-only funds - as tracked by Lipper’s hedge fund database. To see more analysis, including assets under management and domicile information for the top 10 funds in each category, click here for all funds and here for U.S.-only funds. To be truly connected to all the Lipper analytics available on HedgeWorld, become a HedgeWorld Premium Plus member. To find out more about how to do that, visit hedgeworld.com/membership/.

Here we take a look at November 2012 absolute performance for the top 5 funds of funds in two categories - all funds and U.S.-only funds - as tracked by Lipper’s hedge fund database. To see more analysis, including assets under management and domicile information for the top 10 funds in each category, click here for all funds and here for U.S.-only funds. To be truly connected to all the Lipper analytics available on HedgeWorld, become a HedgeWorld Premium Plus member. To find out more about how to do that, visit hedgeworld.com/membership/.

Creative inspiration is derived in many ways. The recent fiscal cliff debate in Washington D.C. may impact the economy at both the local and national level. I was inspired to write the following fun piece below:

Was the Night Before Fiscal Cliffness

By Mark Shore 12/28/2012

Inspired by “Twas the Night Before Christmas” and the craziness of D.C.

Everyone lets gather around the fireplace,

I have a story to tell you of a distant place,

Where everyone kicks a can without any disgrace:

Was the night before Fiscal Cliffness and all thro’ the house,

Not a congressional member was stirring, not even the speaker of the house,

The line was drawn in DC with care,

In hopes each would get what they wanted, but would not share,

Read More

Copyright ©2012 Mark Shore. Contact the author for permission for republication at info@shorecapmgmt.com

Follow Mark Shore on Twitter and Facebook

FRANKFURT, Germany (Reuters)—Austrian bank Bawag PSK is getting a €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

BERLIN (Reuters)—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 — that grand, flawed experiment in monetary union without political union — 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 — Jan. 1 — 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 — a market gauge of how risky these countries are — 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.

Political Will

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 — which led to the ECB’s commitment to buy euro zone government bonds in sufficient amounts to shore up the currency bloc — 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.

Crisis Deferred

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

NEW YORK (Reuters)—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 — along with the 56-year-old Mr. Cohen — 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

TOKYO (Reuters)—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 ÂĄ70 trillion ($826 billion) in assets, are increasingly targeting minimum returns — typically 2.5 percent a year — 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 ÂĄ100 billion by the end of the year to next March, and ÂĄ300 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 ÂĄ7.5 billion. It invests in conventional assets — domestic and foreign bonds and equities — 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 ÂĄ15 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

Greetings, and happy early New Year, HedgeWorld readers.

A couple of server glitches this morning are monkeying with my ability to gather the data I need to post the daily performance tables and charts. The tech folks are on the case and hopefully the issue will be resolved so that I can publish performance information again on Monday [Dec. 31].

These same server issues are also preventing us from posting HedgeWorld News stories to the news part of the site. As a temporary work-around, look for HedgeWorld news stories on the Alternative Reality blog today. Again, hopefully the tech wizards can fix whatever ails the server and we’ll be back in business on Monday.

Thanks for following HedgeWorld this past year, and thanks for your patience.

Sincerely,
Chris Clair
Managing Editor, HedgeWorld

What’s news around the hedge fund industry for Thursday, Dec. 27, 2012:

Around the web

Herbalife fight: ‘Hedge fund equivalent of Stalingrad’. (WSJ’s MarketBeat blog)

RVI Partners raised $7.6 million from certain investors. (Houston Business Journal)

New appraisal opens door to sale of Stuyvesant Town. (New York Post)

John Paulson blames Europe for poor performance, gives British holiday gifts. (New York Post)

Back to the future for Ackman. (New York Post)

From behind bars, Bernard Madoff offers Wall Street commentary. (Los Angeles Times)

CFTC wants futures insurance fund after MF Global payback. (CFTCLaw)

Hot commodities: CFTC staffers. (WSJ.com)

British MPs back forced separation of banks. (Financial Times)

2012: The year of the glitch. (Trader’s Magazine)

David E. Shaw’s reported $75 million home. (Rivertowns Daily Voice)

Here we take a look at November 2012 absolute performance for the top 5 fixed income arbitrage funds in two categories - all funds and U.S.-only funds - as tracked by Lipper’s hedge fund database. To see more analysis, including assets under management and domicile information for the top 10 funds in each category, click here for all funds and here for U.S.-only funds. To be truly connected to all the Lipper analytics available on HedgeWorld, become a HedgeWorld Premium Plus member. To find out more about how to do that, visit hedgeworld.com/membership/.