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.
Reuters – Media mogul David Geffen tried to buy a stake in the New York Times Co from hedge fund Harbinger Capital Partners, but was rejected, a source with knowledge of the matter said on Monday.
Geffen offered to buy the stake at market price, but Harbinger fund manager Phillip Falcone wanted him to pay a premium, according to the source.
Forbes – Billionaire Carlos Slim Helu believes enough in The New York Times that he loaned it $250 million for an eventual 17% stake. The Forbes.com Investor Team says don’t copy him.
Last summer in the Turnaround Newsletter, George Putnam III called out the New York Times Co. as a big name that had been beaten down to the buying level. Along with such fallen giants as General Motors and Eastman Kodak, the newsletter editor recommended the media company at $12 a share. The stock has tanked since, down to just over $5.
Post Chronicle – The New York Times Co is trying to sell its stake in the holding company of the Boston Red Sox baseball team, The Wall Street Journal reported on Wednesday, citing people familiar with the discussions.
The sale, which could give the Times desperately needed cash as newspaper advertising revenue falls and its debt payments loom, could involve its 17.5 percent stake in New England Sports Ventures and possibly the struggling Boston Globe daily newspaper, the Journal reported.
New England Sports Ventures owns the Red Sox, the Fenway Park baseball field where the team plays, and most of the cable network that shows their games.
Bloomberg – Tozai Investment Advisory Ltd., a Tokyo-based hedge fund adviser, is closing its business after market losses and investor redemptions cut its funds’ assets to zero from a peak of $70 million, a senior partner said.
The Cayman Island-based Trident Pacific Japan Absolute Return Fund, which Tozai advises, was closed last month, Angus McKinnon, senior partner at Tozai said in an interview in Tokyo yesterday. The fund, launched in December 2004, invested in Japanese equities using a so-called long-short strategy that bets on rising and falling stock prices, McKinnon said.
Global hedge funds are bracing for the worst year on record as more than 80 firms liquidated hedge funds, segregated assets or limited withdrawals following the MSCI World Index’s 44 percent drop this year and tightening credit conditions. Citadel Investment Group LLC, the hedge-fund manager founded by Kenneth Griffin, said yesterday it will close its Tokyo office, eliminating 12 jobs.
Reuters – Quadrangle Equity Investors, a hedge fund that concentrates on media and communications stocks, will wind down its business after losses and investor redemptions, according to people familiar with the situation.
The relatively small fund employs fewer than a half dozen people, but it is part of Steve Rattner’s prominent Quadrangle Group LLC and so is well-known in media circles.
Quadrangle Equity, like other funds investing in media, has struggled as media stock prices have been hit hard by an advertising downturn and worries that consumers will sharply curtail spending on entertainment.
Reuters UK – Artificial intelligence is helping trend-following commodity hedge funds triumph in treacherous markets when human brains alone aren’t enough.
With industry data showing the average hedge fund down 20 percent or more this year due to strategies messed up by plunging commodity and stock prices, some in the game called Commodity Trading Advisors are up 50 percent or more.
But the trend-following CTAs say it isn’t all their work: credit should also go to their computerized trading systems.
"It’s like a computer playing chess against an excellent individual chess player," said Bernard Drury, president and chief executive at New Jersey’s Drury Capital, a CTA relying entirely on systemic trading or trading without discretion.
"The computer can be counted on not to make human errors, not to make a miscalculation, not to be tired and not to have a bad day," said Drury, whose systemic flagship fund is up 57 percent on the year managing about $155 million (98 million pounds) in commodity and financial investments.
CTAs count themselves as part of the $1.7 trillion hedge fund industry, trading in a wide array of markets that include energy, metals, agriculture, financial futures, bonds, stock indexes and currencies. Like hedge funds, they have management fees of 2 percent and performance fees of 20 percent and strive for alpha, or performance beyond market expectations.
Times of India – Often-touted as manipulative, hedge funds have been time and again blamed for indiscriminate selling and thereby pulling down the domestic stock prices even in India. But India-focused hedge funds have also been affected by the meltdown.
The big and secretive India-focused funds have booked losses to the tune of 46% in 2008 — in the process effectively wiping out the 50% returns clocked by the posted by them in 2007. Hedge funds have an aggressively managed portfolio of investments which use advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns.
New York (HedgeCo.Net) – Halbis Capital Management of HSBC is upping the exposure in their European Alpha hedge fund thanks to cheap stock prices. Bill Maldonado, head of alternative investments, believes it is finally the right time to buy.
"Lots of stocks are trading on increditbly low multiples of 4 to 5 times 2009 earnings," Maldonado said in an interview with Reuters. "They’re pricing in quite a bad recession.”
The $300 million market neutral hedge fund takes both long and short positions. After cutting the gross exposure in recent months, the fund is now buying back into stocks after recent market turmoil made the prices even more attractive.
“We’re rebuilding now because we think the opportunities are definitely there, but we’re being very cautious,” he explained. Even if we see opportunities that are very, very appetizing, they can easily go against you another 10, 20, 30 percent.”
This move comes at a time when hedge funds are trying to recover from one of their worst years ever and when hedge funds across the board are freezing redemptions in hopes of staying afloat. Just last week, Deephaven Capital Management halted withdraws on two of their funds. Other reputable names that have imposed recent restrictions include Drake Capital Management, Citadel and Pardus Capital.
Maldonado explained that while returns on his European Alpha are already admirable at 3 percent, they are likely to improve because there is less hedge fund money competing for profitable trades thanks to reduced leverage and redemptions.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – Three Dillard’s Inc board members rejected a plea from hedge funds to have the company’s CEO, William Dillard II, booted from the chair.
Barington Capital Group LP and Clinton Group Inc. had been calling for the board to start an immediate search for a new CEO in addition to ousting other family members due to the company’s poor performance and lagging stock prices.
However, in a letter obtained by Reuters yesterday, directors Peter Johnson, Warren Stephens and Robert Connor said the current management team “has an appropriate strategy for dealing with the new environment.”
The board members also failed to side with the hedge funds on their claim that William Dillard II along with other family members make far more than the same executives at similar firms. Going a step further, they cited reports from the Institutional Shareholder Services and stated that the CEO’s salary is “far below the median in its peer group in 2007.”
The hedge funds original complaint mentioned a report by advisory Proxy Governance while claiming William Dillard II makes 54 percent above the median. The board fired back, pointing out that the peer group selected by the hedge funds “included companies in totally dissimilar industries to Dillard’s.”
Together, the hedge funds own nearly 6% of Dillard’s class A stock. The Dillard family owns nearly all of the class B stock, a move originally designed by the current CEO in order to make ceding control virtually impossible.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – Two hedge funds are looking to oust William Dillard II, CEO of Dillard’s Inc., after poor performance and lagging stock prices.
Barington Capital Group LP and Clinton Group Inc sent a letter to the SEC that was released yesterday, which asked the company to start to an immediate search for a new CEO.
"In our opinion, a management team with a comparable record of poor performance at any other company would have been fired long ago," the hedge funds said in the letter.
In addition to sales declining over the course of the year, Moody’s Investors Service warned last week that it may cut Dillard’s credit ratings to junk status.
The hedge funds are also looking to replace some of the other family members who work for the company, saying they are "overpaid and under-qualified for the positions they hold and can be readily replaced with more talented retailers."
The hedge funds claim that William Dillard II makes far more than other CEOs at similar companies. According to a report they cite from advisory firm Proxy Governance, William makes 54 percent above the average, while other executives at Dillard’s make 185 percent above the median.
Dillard’s, in an attempt to avoid a proxy battle with the aggressive hedge funds, agreed to place four candidates from the fund onto the Board of Directors in April.
The hedge funds own almost 6 percent of Dillard’s class A stock. Dillard’s stock is divided into two shares, a move that William made almost four decades ago to guard against takeovers.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Bloomberg – U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings.
These gaps, which caused the Dow Jones Industrial Average to swing as much as 104 points this month in the final minute of trading, suggest investment firms faced with client redemptions and plunging markets may be gaming the closing-auction system. The discrepancies spurred the Financial Industry Regulatory Authority, which oversees 5,000 brokerages, to look for evidence that investors are improperly swaying prices.
General Electric Co., McDonald’s Corp. and the 28 other Dow companies swung 0.6 percent on average at the close the last two weeks, according to data compiled by Bloomberg. That’s almost eight times greater than the average three months ago. Because of the swings, the New York Stock Exchange plans to distribute information on the closing auction more often to help mitigate volatility.
Bloomberg – Wolver Hill Japan Multi-Strategy Fund, run by Deutsche Bank AG’s former prime brokerage sales chief in Tokyo, resisted the worst month for the nation’s stocks in almost 15 years to be little changed in September.
The $11 million fund of hedge funds, which invests in 14 hedge funds with a combined $5.8 billion of assets, slipped 1.4 percent in September based on preliminary figures, said Ed Rogers, chief executive officer of Wolver Hill’s local advisory firm, Rogers Investment Advisors Y.K. The Topix index of 1,714 companies tumbled 13 percent.
Foreseeing a decline in equity prices, Wolver Hill made a shift during the past year into hedge funds that use trading- focused strategies, and away from so-called long-short funds that depend on rising and falling stock prices, Rogers said. Trading- focused funds, including so-called event-driven strategies, trade securities of companies going through events such as mergers, acquisitions and management changes.
