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.
NewsDay – Here’s something that might provide a bit of solace amid the plunging values in your retirement accounts: Warren Buffett is losing lots of money, too. So are Kirk Kerkorian, Carl Icahn and Sumner Redstone.
They are still plenty rich, but their losses — some on paper and others actually realized — illustrate how few have been spared in today’s punishing market when even big-name investors, corporate executives and hedge-fund titans are all watching their wealth evaporate.
The portfolio damage for some of these high-flyers has soared to billions of dollars in recent months. And they can’t just blame the market’s downdraft — some did themselves in with badly timed stock purchases or margin calls on shares bought with loans.
"It’s always hard to beat the market no matter who you are," said Robert Hansen, senior associate dean at Dartmouth’s Tuck School of Business. "But when the ocean waters get that rough, it is hard for any boat to avoid getting swamped."
Guardian Unlimited – The threat of further redundancies hung over the City last night as it emerged that the investment bank Goldman Sachs is expected to cut at least 600 jobs in London. A wide-ranging cull of hedge funds in the capital was also predicted as the fallout from the banking crisis spread to vulnerable sections of the finance industry.
Goldman plans to cut 10% of its worldwide workforce to reflect the worsening economic conditions. It has about 6,000 staff in London. Sources close to the company said no decision had been taken on which countries or business lines would take the brunt of the cuts, but there was an expectation all operations would be hit.
Recently bailed out by the US government and a $5bn (£3bn) injection from the investor Warren Buffett, Goldman has seen many of its most lucrative business areas, including debt financing for mergers and takeovers, in effect closed down.
Reuters – General Electric Co plans to raise $15 billion through stock sales — including $3 billion from Warren Buffett — to improve liquidity and give it the option of more acquisitions at a time of intense market turmoil, the U.S. conglomerate said on Wednesday.
The news helped to erase some of the day’s slide in GE shares, which fell more than 9 percent earlier, but was not enough to push them into positive territory. Investors remained worried about the troubles at GE’s vast finance arm — which has businesses ranging from loans to mid-sized business to investing in real estate.
It was the second big strategic investment by Buffett’s Berkshire Hathaway Inc in the battered finance sector in as many weeks. Last week Berkshire said it would invest $5 billion in Wall Street’s Goldman Sachs Group Inc.
New York Post – Billionaire Tom Petters fancied himself the next Warren Buffett – that is until his empire starting crashing down like a house of cards.
The feds accuse Petters, one of Minneapolis’ fastest rising business stars, of secretly being at the center of an elaborate $2 billion corporate ruse, stretching over the past decade, while he hobnobbed with billionaires and movie stars.
Petters stepped down from his Minneapolis-based Petters Group Worldwide after federal agents raided his offices in several cities, acting on a tip from a disgruntled insider.
BusinessWeek – Not many stocks were left standing when the Dow Jones industrial average crashed by 504 points on Sept. 15—the worst drop since the September 11 terrorist attacks. One stock that did stand firmly was Coca-Cola, the world’s largest soft drink company. When the tsunami-like wave of selling was done on that frenzied day, Coca-Cola’s stock stood at 54.75, up from the previous session’s closing price of 54.50.
True, it was a razor-thin rise, but considering the devastation in the marketplace that day, just staying upright was a mighty accomplishment, as the financial giants lost some 20% to 94% of their value. Nonfinancials also got ravaged, including General Electric, which tumbled 8.04%, ExxonMobil 5.48%, Sprint Nextel 5.70%, Intel 3.97%, and Merck 3.25%.
For a while there, Coke seemed to have lost its fizz. From 2003 through 2006, its shares traversed a narrow range, meandering between 37 to 50. In 2007, the stock came back, trading up to a high of 65 by early January 2008. But then the stock got caught in the market’s subprime-mortgage-driven decline in July, which yanked Coke down to a 52-week low of 49.60. Since then, it’s eased back to the mid-50s.
Buffett’s Beverage
That’s because Wall Street appears to have rediscovered Coca-Cola. Of the 17 analysts who follow Coke, not one recommends selling the stock, and all but two tag the stock a buy. Two analysts rate it a hold. (It’s also reassuring that Coke’s largest stakeholder is Warren Buffett’s Berkshire Hathawa, which owns an 8.6% stake.)
The Independant – Susan Solovay, founder of a New York-based fund of hedge funds, explains to Martin Baker why her strategy of investing only with female managers will pay off – and why Warren Buffett is in fact a woman trapped in a man’s body.
Susan Solovay is every inch the modern female executive in the revved-up engine room of New York finance. She breezes into a noisy, trendy restaurant in midtown Manhattan, and a number of things are pretty much immediately apparent: she is super-smart, pencil-slim with dark hair, deceptively youthful (she’s in her late 40s), fast-talking, full of energy, successful – and late.
Over the din, Solovay apologises profusely. The markets may be going through a dodgy period, and the US economy teetering on the edge of recession, but the founder of Pomegranate Capital, a fund of hedge funds that invests exclusively with women hedge fund managers, is still moving at top speed and cramming ever more into a working day. By the time we meet, all the little overruns have put her behind schedule, and she’s very sorry.
Reuters India- A Chinese fund manager has won a lunch with famed U.S. investor Warren Buffett after bidding $2.11 million for the opportunity in a charity auction, more than three times what the lunch fetched last year.
Zhao Danyang, who runs Hong Kong-based Pureheart China Growth Investment Fund, had the winning bid in the eBay Inc auction that ended late on Friday.
Proceeds of the lunch with the 77-year-old chairman of Berkshire Hathaway Inc benefit Glide, a nonprofit foundation in San Francisco that offers programs for the poor, hungry and homeless.
Mohnish Pabrai, an Irvine, California-based investor, paid $650,100 for the right to dine with Buffett last year.
Buffett began donating lunches in 2000 after his wife Susan introduced him to the Rev. Cecil Williams, who founded Glide and runs the Glide Memorial United Methodist Church. The auctions, including the current one, have grossed more than $4 million for the organization. Last year’s winning bidder paid $650,000 for lunch with Buffett.
Los Angeles Times – The hedge fund industry can only exist because investors believe their fund managers will deliver above-average returns over time, despite the portfolios’ hefty fees.
Master investor Warren Buffett, who has long derided those fees, now has made an interesting bet with a firm that runs so-called funds-of-hedge-funds: He’ll beat their net returns over the next decade simply by owning a mutual fund that tracks the Standard & Poor’s 500 index.
The bet is the subject of this article in Fortune magazine by Buffett’s long-time friend, writer Carol Loomis.
Buffett is going up against Protégé Partners LLC, a New York-based money manager that picks hedge funds for its clients.
Loomis writes: "Each side put up roughly $320,000. The total funds of about $640,000 were used to buy a zero-coupon Treasury bond that will be worth $1 million at the bet’s conclusion." Whichever side wins, the proceeds will go to charity.
