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.
New York (HedgeCo.Net) – Hedge fund manager William Ackman of Pershing Square Capital Management is in talks with discount retailer Target to nominate some potential members to their board of directors, according to a recent Securities and Exchange Commission filing.
The hedge fund currently holds a 9.7 percent stake in the Minneapolis-based company, but has been vocal about its disappointment relating to plummeting share prices and lagging sales.
Earlier this week, Target confirmed their fourth-quarter profit fell 41 percent. Shares closed at $27.82 yesterday, a 50 percent tumble since its peak last September.
Ackman did not state how many board members he wished to nominate, or who they were. He also said he may decide to up or reduce his stake in the company, although he still believes there is plenty of potential in the retailer.
Ackman made a bold move earlier this year, when he allowed investors to withdraw as much of their capital as they liked in his Pershing Square IV Fund. The fund, which was heavily invested in Target, plunged 90 percent this year, prompting an apology to investors and a green light to clear their cash out. Ackman contributed $25 million of his personal funds to help pay back clients of the fund.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Seekingalpha.com – Bill Ackman explains how hedge funds work, specifically with regard to investors in Pershing Square IV, his fund dedicated (disastrously) to going long Target.
Some of these investors, who are for the most part other hedge funds (that comprised approximately $1.3 billion of the original $2 billion of fund capital), have told me that they previously hedged a substantial portion, or in some cases 100% or more, of their exposure to Target through PSIV.
So a bunch of hedge funds invested in PSIV to go long Target (while paying Ackman his 2-and-20), and at the same time went short Target in order to hedge their PSIV exposure. And for this piece of genius they charge their own investors 2-and-20.
West Palm Beach (HedgeCo.net) – As investors look to independent and unbiased hedge fund risk due diligence, Pelorus Advisors has decided to launch an operational risk management service for hedge fund investors. Unlike other due diligence firms, Pelorus only offers its risk due diligence service to hedge fund investors.
“It’s an enormous conflict of interest for diligence teams to be compensated by the same hedge funds they cover,” said Jeff Rathgeber, co-founder and partner of Pelorus. “The hedge fund community has seen more than enough target-sponsored ‘independent’ report cards. We’ll let other risk management firms issue their seals of approval based on manager-supplied data.”
Pelorus is staffed by a team of hedge fund experts that have spent years operating inside complicated hedge fund structures. “It is only from this vantage point that an advisory firm gains the experience needed to identify the true risks that hide within hedge funds,” said Ken McGee, Managing Director of Pelorus’ Hedge Fund Practice Group. “It is exactly this kind of experience that is missing from most hedge fund due diligence firms. In our opinion, this lack of inside experience is what moves most firms away from being Hedge Fund Risk Experts and moves them into the category of Data Regression Analysts.”
“A clear distinction that separates Pelorus Advisors from other firms is that we don’t harvest massive amounts of publicly available data, crunch it, and issue armchair reports to investors,” said Rathgeber. “Nor do we merely rely on data that is supplied by the target hedge funds we audit. Instead, we conduct in-depth, on-site engagements to dig deep into a hedge fund’s operations and run through its control structure to ensure that our clients’ investments are properly protected.”
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New York Daily News - Jacob Ezra Merkin was once revered as a wizard of Wall Street, an angel of charity and a lion of Judaic studies.
Now he has earned infamy as a destroyer of wealth, a menace to philanthropy, a pariah in some synagogues and a target of a probe by the state attorney general’s office.
A single unforgivable deed capsized his fortune, reputation and social standing overnight: He embraced a false prophet of profit named Bernard Madoff.
The Austin Chronicle – Oh, this is just dandy! Hedge-fund schemers and Wall Street manipulators – the very characters who brought us the Great American Housing Collapse – have a new target for their fast-buck profiteering: farming. E-I-E-I-O!
Speculators have long messed with farmers by artificially manipulating prices on everything from corn to soybeans. But now they’re pooling up billions of dollars from global investors to go after the farms themselves, as well as fertilizer plants, grain elevators, ships and barges, and other basic tools for producing, transporting, and storing our food supply. As one hedge-fund operator says: "It’s going on big time.
New York (HedgeCo.Net) – CSX is finding themselves in the middle of another battle, this time with a shareholder who is suing the railroad company along with hedge funds TCI and 3G Capital Partners.
Shareholder Deborah Donoghue is seeking the recovery of “short swing” profits from sales conducted by the two hedge funds between August and September 2007. She is hoping to recover profits from the sale of shares by the funds, before they announced their plan to launch a proxy battle and shake up the Board of Directors.
Donoghue is claiming that TCI and 3G sold 2 million shares of CSX stock and within six months, bought a large amount of shares and derivatives equal to shares of CSX common stock at lower prices.
“Such profits are recoverable on behalf of CSX by plaintiff as a shareholder of CSX, the latter having failed or refused to act in its own right and for its own benefit,” stated the complaint.
Donoghue isn’t the only one who believes the hedge funds didn’t act in good faith. CSX has been in a battle with the two funds ever since they exerted their controlling stakes to take over four board seats on the Jacksonville, Florida based company after a drawn out proxy battle.
CSX had argued that the funds “secretly coordinated” their fight to gain the seats on the board while failing to disclose their full stake in the company. The judge eventually ruled with the hedge funds, allowing them to vote their shares at the company’s annual meeting in June.
Hedge funds are not required to report to the Securities and Exchange Commission, thus these “short-swing” profits were not publicized.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – Jacksonville-based CSX Corp’s profit fell 6.1 percent in the third quarter according to their regulatory filing yesterday, thanks to reduced freight in a sour U.S. economy. This is the first time in the last five quarters that the railroad company has seen a decrease in profit.
Net income for the third quarter totaled $382 million, down $25 million from a year ago while revenue rose 18 percent to almost $3 billion.
While per-share earnings rose from 91 to 94 cents, it is because the company had reduced the amount of outstanding stock.
CEO Michael Ward maintains a positive outlook, saying CSX has strong liquidity and plenty of access to credit.
“CSX delivered impressive financial results in a challenging economy,” Ward said in a statement. “Our resilient business portfolio and disciplined operations continue to generate substantial earnings growth for shareholders.”
The company recently made headlines for its drawn out proxy battle with hedge funds TCI and 3G Capital Partners. After reluctantly placing two representatives from the funds on the Board of Directors, an appellate court denied their attempt to withhold two more seats in September. CSX was forced to concede, giving the activist hedge funds four seats total on the Board.
Despite the loss in profit, CSX increased their operating income by 31 percent to $733 million by moderating fuel costs and a “focus on productivity and cost control.” They are predicting that full-year earnings will come out at the “low end” of the estimated $3.65 to $3.75 a share.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
West Palm Beach (HedgeCo.net) – Hedge fund advisor Edge Capital Partners, LLC has launched a new website (www.edgecappartners.com) highlighting the firm’s offerings in the areas of asset allocation strategies, benchmarked investment options, corporate mergers and acquisitions and finance strategies, wealth management and individual portfolio management.
Designed by Glick Interactive, the Edge Capital Partners new website decribes the firm’s culture and goals. "(our firm) is built on providing unbiased wealth management solutions. Our goal is to elevate the standards of wealth management and use our website as a tool to communicate our firm’s values in this challenging global market environment,” said Partner J. Peek Garlington III.
Edge Capital Partners, LLC is a provider of wealth management and investment advisory services to a select group of high-net-worth and institutional clients globally. Seasoned advisors understand the challenges of creating solutions that match clients’ unique and evolving needs and work in unison with clients, their advisors and accountants to capture, generate, and implement all points of strategy and service.
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Reuters – Lehman Brothers Holdings Inc agreed on Wednesday to sell its 45 percent stake in hedge fund R3 Capital Partners for $250 million in cash and a $250 million investment in another fund managed by R3.
Lehman, which filed for bankruptcy protection last month, acquired the stake in May in return of a roughly $1 billion investment, according to document filed in U.S. Bankruptcy Court in Manhattan.
R3 Capital is run by Richard Rieder, a former head of global principal strategies at Lehman.
Lehman owned the non-voting, minority ownership stakes in the master fund, general partner, special limited partner and management company of R3 Capital Partners, an asset manager of funds investing primarily in corporate bonds and loans.
West Palm Beach (HedgeCo.net) – Argo Group, an emerging markets investment manager, announced the launch of The Era Shopping Park Iasi. Projected to generate EUR 18 million ($25.7 million) in annual rental income the launch is funded by Argo’s private equity fund, the Argo Capital Partners Fund 1, together with a local joint venture partner, Omilos Group.
"From Argo’s perspective this has been an excellent investment," says Argo Capital Management chief investment officer Andreas Rialas. "Through our partnership with Omilos we acquired two excellent sites at a time when property and land prices were relatively low. Since then both projects are well advanced and demonstrating their potential to generate substantial returns."
The Park is the first of two planned retail parks to operate under the Era Shopping Park brand. The Iasi retail park will be the largest outside of Bucharest and the second largest in Romania.
Based in Romania’s second largest city, situated in the north-east of the country close to the Moldovan border. The Era Shopping Park Iasi will offer on completion more than 115,000 square metres of gross lettable area.
The second facility planned, the Era Shopping Park Oradea, is located in Oradea in the north-west of Romania, close to the Hungarian border. This smaller project with a gross lettable area of 65,000 square metres is expected to open in March next year. The Oradea site is projected to generate annual rental income of EUR 10.5 million.
"Economically, Romania continues to perform strongly. Following its EU accession, there has been a significant uplift in consumer spending and as demonstrated by tenant demand for Era, western European retailers are increasing their presence in the country," Rialas concluded.
The Argo Group has significant experience in property notably through the Argo Real Estate Opportunities Fund, a Guernsey-domiciled closed-ended investment company that invests in the commercial property markets of Central and Eastern Europe. The AIM-listed company is managed by Argo Capital Management Property, which has offices in London, Bucharest and Kiev.
The Argo Capital Partners Fund I was launched in August 2006 to focus on delivering private equity returns from different types of investments and situations in emerging markets. The fund, which was launched targeting a minimum internal rate of return of 40 per cent, has not yet exited any investments.
Its current portfolio includes Infarmasa, a generics pharmaceutical company in Peru, Nigerian commercial and retail bank Intercontinental Bank, Greek triple-play telecommunications Telecoms and Russian regional bank Probusinessbank as well as the Era Shopping Parks.
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Florida Times Union – CSX Corp.’s proxy fight with two hedge funds apparently ended Monday, after an appellate court turned down CSX’s attempt to block some of the funds’ votes for the company’s board of directors.
CSX, which had already seated two representatives of The Children’s Investment Fund Management LLP and 3G Capital Partners Ltd. on its board, said Monday it will now add two additional TCI and 3G nominees.
All four TCI-3G nominees won election to CSX’s 12-member board of directors at the company’s shareholders meeting in June. But after the votes were counted, CSX said it would only seat two of them until its court case was resolved.
On Monday, a three-judge panel of the U.S. Court of Appeals for the Second Circuit ruled against CSX, upholding a June decision by U.S. District Judge Lewis Kaplan. CSX had filed a lawsuit saying that TCI and 3G violated federal disclosure laws about their stock ownership in CSX. Kaplan agreed that the funds violated those laws, but said that did not give him the authority to block their proxy votes.
New York (HedgeCo.Net) – Hedge fund TCI has won two more seats on the board of railroad operator CSX, in what looks to be the finale of a year-long proxy battle.
A U.S. Court of Appeals judge ruled yesterday in New York upheld an earlier ruling that the court did not have the power to stop both TCI and fellow hedge fund investor 3G Capital Partners from voting shares at CSX’s annual meeting. The ruling came despite the fact that the funds had supposedly violated certain disclosure agreements through their accumulation of equity swaps.
The June 25 shareholders meeting in Jacksonville, Florida was anything but decisive, with the head of CSX Michael Ward telling reporters that the vote was too close to call. While CSX did concede two of the seats to 3G Managing Director Alexandre Behing and Gilbert Lamphere, former head of Canadian National Railway Co., the hedge funds claimed that they had in fact won four of the 12 seats.
"It is time for the entire duly elected Board, including Chris Hohn and Tim O’Toole, to get to work and make progress on the shareholder mandate they received in June,” the hedge funds said in a statement after yesterday’s ruling.
The four new board members will be seated when the company’s annual meetings reconvene on September 24th.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
