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Bloomberg – Blackstone Group LP, the world’s largest private-equity firm, fell to a record low in New York trading this week on concern that a rebound in leveraged buyouts will lag behind any economic recovery.
“Given the economic outlook and pressure on asset values, even on existing investments, it’s going to be a while before they have a chance to come back,” said Robert Lee, an analyst with Keefe, Bruyette & Woods Inc. in New York. “It’s hard for investors to see through that valley.”
After announcing about $169 billion of buyouts in 2006 and 2007, New York-based Blackstone has since completed $9.2 billion of deals. An absence of financing for new acquisitions and an inability to sell current holdings have idled the firm and competitors such as KKR & Co. and Carlyle Group LP. Investors say deal won’t resume until after the economy starts to grow and banks can rebuild capital depleted by losses on mortgage-backed securities and previous LBO loans.
Blackstone, run by Chairman Stephen Schwarzman, probably will report a loss tomorrow of 31 cents a share, its third in the past four quarters, according to the average estimate of seven analysts in a Bloomberg survey. The company had a profit, excluding some costs, of 8 cents a share in the same quarter a year earlier.
Of the nine analysts who rate Blackstone shares, six have ratings equivalent to hold, including Lee. One analyst, Barclays Capital’s Roger Freeman, suggests selling the stock. Two recommend clients buy the shares.
Blackstone dropped below $4 a share for the first time on Feb. 23, closing at $3.89, almost 90 percent less than its $31 initial public offering price in June 2007. The stock declined 17 cents to $4.12 yesterday in New York Stock Exchange composite trading.
Bloomberg – Investors withdrew a record $43 billion from hedge funds in September as they fled distressed-securities and stock funds because of poor performance, TrimTabs Investment Research said today.
The estimated outflows were the most since TrimTabs started tracking the industry in 2000, Chief Executive Officer Charles Biderman said in an interview. Investors pulled $14.4 billion from funds focused on troubled securities and $8.4 billion from equity long-short funds, which bet on rising and falling stocks, the Sausalito, California-based company said in a statement.
“We’re told from some of our clients that most of the hedge funds have sold enough equities to cover the redemptions,” Biderman said. “There shouldn’t be more forced selling.”
Bloomberg – Hedge funds that profit from turbulence in the financial markets are beating stock, bond and commodity investments for the first time in five years.
Volatility hedge funds climbed 7.3 percent this year through August, according to the Newedge Volatility Trading Index. The average equity fund fell 8.38 percent, corporate fixed-income funds declined 4 percent, and energy and basic- materials stock funds dropped 6.36 percent in the same period, data compiled by Chicago-based Hedge Fund Research Inc. show.
“Nobody knows the direction of the markets or economy at the moment, and we’re profiting from that uncertainty,” said Trevor Taylor, 35, co-chief investment officer at Miami-based Innovative Options Management LLC. The firm’s $90 million hedge fund rose 12.3 percent this year through August, after returning 25 percent in 2007.
Price swings that helped Taylor started with the collapse of subprime mortgages that have left the world’s biggest banks with $506 billion of writedowns and credit losses in the past year, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index fell 19 percent since October as credit dried up and the U.S. economy edged to the brink of recession.
Tacoma News Tribune – Changes in winning and losing investments have come so swiftly of late that you might not have realized your favorite approach has backfired lately.
International funds – the hot funds of the last few years – have turned more disappointing than U.S. stock funds. Gold has lost its luster or, more precisely, more than $200 since reaching more than $1,000 an ounce a few months ago. Oil is in a bear market – a decline of 20 percent or more. Small-cap funds, which typically would be shunned during rough economic times, have been on a roll.
The last few weeks have shown why financial planners try to discourage clients from loading up on a few winners while discarding everything else. They know that changes in cycles can come quickly, and without warning, turning winners into losers and vice versa.
Many analysts are confessing their surprise at the twists of the last few weeks. It now appears that the globe is not immune from U.S. economic problems, although that was a favorite theory until a couple of months ago.
