Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
The Bureau Of Investigative Journalism - The hedge fund Magnetar helped create billions of dollars’ worth of risky deals called collateralized debt obligations, many of which failed spectacularly in the financial crisis. Magnetar, meanwhile, had taken positions that allowed the firm to profit when many of those same CDOs collapsed. Since Magnetar’s dealings was reported on two years ago, there’s been a long line of investigations and settlements related to the hedge fund.
Magnetar itself has never been charged with wrongdoing, and it has always maintained that it did not have a strategy to bet against CDOs they were involved with. But today’s Wall Street Journal reported that Magnetar is indeed under investigation by the SEC.
Guardian – “Much of investment banking is not about being a brilliant fisherman. It’s about muscling into a spot on that riverbank where you can throw your net out. Getting into the money flow. Have you watched the Sopranos? Making managing director is like being made captain. Instead of a patch of New Jersey, you are given a product area where you get to collect the rent.
“Are investment bankers bothered by this? I was. That’s one reason I left. I’d say many suppress it. It’s a bit like insurance fraud, it can feel like victimless crime. Everyone around you is doing it. You are under enormous stress working your balls off, so it doesn’t feel like easy money, either. Group dynamics are strong. Basically dissenters get trashed, or ascribed an ulterior motive for voicing opposition. It’s weird how some people feel attracted to the dark side. Once they are cast as a bad guy, they relish it rather than feel guilty or troubled.
Reuters – U.S. securities regulators are investigating the hedge fund Magnetar Capital for its role in putting together packages of consumer loans that big banks sold as bonds before the financial crisis, sources confirmed on Thursday.
The Wall Street Journal first reported Magnetar was “a target” of an Securities and Exchange Commission investigation. Magnetar has been involved in at least one previous investigation involving a large Wall Street bank and securitized loans.
CrossCut – When Facebook goes public Friday morning, one large beneficiary will be San Francisco hedge fund founder Chris Hansen, who is also negotiating with Seattle and King County to obtain $200 million of low-interest and presumably tax-free public financing to build a new professional basketball and hockey arena in the city.
With the Facebook IPO, Hansen’s hedge fund, Valiant Capital and its associated entities, stand to make hundreds of millions of dollars for clients and its founder.
Forbes – At the Ira Sohn conference Wednesday, rock star investors gave their best picks to a well-dressed group of 2000 attendees from hedge funds and mutual funds around the world. At the 17th Annual Conference, where proceeds go to fund pediatric cancer research, portfolio managers hung on every word of the billionaire speakers. No wonder trades are highly correlated. The conference highlighted red flags from the bearish speakers.
The Chinese have funded many of their major infrastructure projects with dollar-denominated debt, and the funding source (the US) has dried up. Unfortunately, the Chinese government may need more cash to complete the infrastructure projects. The projects don’t generate adequate cash flow and are non-self-sustaining. With the increased credit risk, spreads could widen making new loans more expensive.
Hume Weekly – The superannuation watchdog’s repeated failure to recognise fraud in Trio Capital – which went on to become Australia’s largest superannuation theft – has been criticised by a parliamentary committee.
The committee today announced 14 wide-ranging recommendations aimed at addressing the fallout from a theft put at $176 million in investors’ cash missing from two fraudulent hedge funds: Astarra Strategic and ARP Growth.
Business Today – Former Goldman Sachs director Rajat Gupta faces one count of conspiracy to commit securities fraud and five counts of securities fraud. The trial by jury begins in New York on May 21.
On March 12, 2007 Gupta participated by telephone, from the premises of Rajaratnam’s New York hedge fund Galleon Group, in the audit committee meeting of the Goldman Sachs board about the company’s quarterly earnings to be announced the next day (March 13).Twenty-five minutes after the call ended, Galleon funds bought 3,50,000 shares of Goldman stock.
The Independent – Readers of the financial pages will be well aware of Nicola Horlick, the superstar fund manager who landed the nickname “superwoman” as she juggled a high-powered career with raising six children. She appears less regularly in the arts section, but that is set to change as her new money-making venture has Hollywood in its sights.
Horlick may be more comfortable in the Square Mile than Pinewood, but she believes her expertise in running portfolios and assessing risk can prove lucrative when applied to film-making. This is no Damascene conversion from the world of finance to the creative arts, as some in the City experienced in the wake of the crash. “It’s all about making money,” she says.
Forbes – During the past decade, hedge funds emerged from obscurity as the darlings of Wall Street. The industry’s outsized remuneration attracted the most talented financiers. And the ability to repeatedly earn hefty returns even in down markets allowed the industry to bypass its larger cousin – mutual funds – as the sexy investment vehicle of choice.
Soon, names like Ray Dalio of Bridgewater Associates and John Paulson of Paulson & Co. eclipsed the financial gurus of years past. Whether big or small, experienced or neophyte, investors no longer looked to figures like mutual fund king Peter Lynch of Fidelity Investments for wisdom.
Bloomberg – SAC Capital Advisors LP and Viking Global Investors LP were among hedge funds that sold a net 6.1 million shares of Apple Inc. (AAPL) last quarter, taking advantage of the 48 percent jump in the iPhone maker’s stock.
Hedge funds accounted for more than a third of the 15.2 million net Apple shares that were sold by endowments, banks, insurance companies and other investors during the first quarter, according to data compiled by Bloomberg, which was aggregated from regulatory filings. Even so, Apple remains hedge funds’ most valuable holding. As a group they controlled 37.8 million shares as of March 31.
City AM – Opportunistic hedge funds were celebrating the “trade of the century” yesterday as Greek authorities agreed to pay out €435m (£346m) of bonds that were not included in recent haircuts.
Owners of euro-denominated Greek bonds have taken a loss on their investments as part of March’s bailout agreement for the debt-ridden Mediterranean state. Yet bonds denominated in currencies such as sterling, which are liable to laws outside Greece, now appear more likely to be paid up in full.
NYT – Alex Getelman was still in his 20s when he turned his nascent company into what he called “New York City’s fastest-growing general contracting and construction management firm.” He had a list of blue-chip clients, a plush office on 57th Street and a luxurious home on Long Island’s North Shore.
But in order to help pay for his castlelike stone house on 3.3 acres in Old Brookville, prosecutors charged, Mr. Getelman systematically inflated the cost of work for one of the largest hedge funds in the world, Citadel Investment Group.
