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CNN Money - Third Point Management, a New York hedge fund run by one of the country’s most outspoken and controversial investors, has come under investigation from the Securities and Exchange Commission.
The $5.6 billion fund, whose founder Daniel Loeb is well known for his pointed regulatory filings targeting chief executives he deems underperforming, informed investors in a letter last month that it has been notified that the SEC has commenced a formal investigation into its communications with other hedge funds.
The SEC’s investigation into Third Point comes at a time when hedge funds are being criticized for playing a key role in the trading of various companies as well as in the continuing financial crisis. The SEC is investigating the actions of up to 50 hedge funds in the collapse of Bear Stearns and in the continuing troubles of Lehman Brothers and mortgage guarantors Fannie Mae and Freddie Mac.
According to reports, the SEC is investigating whether hedge funds knowingly and intentionally spread falsehoods about the financial strength of these - and other - brokers and banks. According to Institutional Investor magazine, which broke the Third Point story Tuesday, Loeb told investors that the communications were uncovered during the course of a routine audit last year after Third Point became a registered investment adviser.
Bloomberg - Daniel Loeb, whose Third Point LLC is being investigated by regulators, said his "give-and-take” with other hedge-fund managers doesn’t violate securities laws.
The U.S. Securities and Exchange Commission is probing New York-based Third Point, which manages $5.6 billion, for its communications with other hedge funds, Loeb said in a July 25 letter to clients. The investigation follows an SEC audit last year during which examiners noted the firm "regularly communicated with hedge funds about investment and trading ideas,” according to the letter.
"Such conversations permit us to test our hypotheses and refine our thinking and, as a result, we believe that participating in give-and-take with other managers is in the best interest of our investors,” Loeb wrote in the letter, a copy of which was obtained by Bloomberg News. "Our outside counsel has examined this matter thoroughly and assured us that our position is consistent with the securities laws.”
The Age - Third Point, the New York-based hedge fund run by Daniel Loeb, bought a stake in BHP Billiton worth $US162 million at the end of June, adding the world’s largest mining company to its portfolio.
Third Point, known for pushing companies to make changes that increase their stock prices, bought 1.9 million shares in Melbourne-based BHP during the three months ended June 30, according to a filing with the US Securities and Exchange Commission on August 14.
Loeb, 45, who started Third Point in 1995, bought the stake in the quarter after BHP announced a hostile $US134 billion bid for Rio Tinto. Loeb pressured US oil and natural-gas producer Pogo Producing for more than a year to shed assets or sell itself before it agreed to be bought by Plains Exploration & Production for $US3.6 billion in July last year.