To: Viking Investors
From: O. Andreas Halvorsen
Our second quarter performance was a loss of 5.0% for VGE and a loss of 11.9% for VLF net of all fees on a composite basis
On an unlevered basis, VGE’s long portfolio was down 11.2% and the short portfolio was down 10.3%, yielding a long-short spread of negative 0.9% (see the attached Base Case Analysis). In the quarter, five long positions cost us 0.5% or more while no short contributed an equal amount.
We are greatly disappointed in Viking’s returns both on an absolute basis and relative to the indices. We do not blame factors outside of our control, but acknowledge that changes in the global macro-economic, political, and regulatory environment; a broad-based fall in stock prices around the world; and unusually high levels of correlation among these prices have increased the degree of difficulty in generating a profitable long-short spread. We are paid to deal with such challenges at all times and are in a business that requires hard work and consistent processes every day. When the market gives us a disappointing score for our efforts, we examine our results and our methods to ascertain whether we need to make adjustments – this is the Viking way. Rest assured that our objective remains to achieve maximum capital appreciation commensurate with reasonable risk, and we remain firmly dedicated to meet this goal. In light of this, we have engaged in a thorough examination of our results.
Archive for July 2010
Viking Global Is Greatly Disappointed In Its Returns, Not Blaming Self, But Still Looking Within To See What Went WrongBy Bess Levin
What To Tell The Judge When You Inevitabley Get In Hot Water For Hiring Prostitutes To Service Your EmployeesBy Bess Levin
At some time in the future, near or distant, at least a few of you are going to have to explain why you brought in a bunch of prostitutes for your colleagues and/or clients. Given. The circumstances will vary, as will the types of girls hired (Peter likes brunettes, Jim wants someone who will call him Judy, the guys on the commodities desk like to attend rodeos) but it’s likely that you’ll all have to provide a rationale for the impetus behind this particular perk of the job, and why, in the eyes of the law, it should be seen as no big deal. And when that happens, I think you should all consider taking a page from David Brooks’ playa-book. Read more »
Barney Frank is a pretty well-known Representative. But you know what? Some people just don’t keep up with the who’s who of Congress. Having said that, I’m pretty sure Mr. Frank did not go to the trouble of crafting this financial reform bill thing so that he could show up to various establishments (night-clubs, the supermarket, the ferry to Fire Island, what have you) and suffer the indignity of not only having to ask “Do you know who I am?” but have the answer be “No” and/or “I don’t care, sir.” Read more »
UBS Swings To Profit (WSJ)
The bank swung to a profit of 2.01 billion Swiss francs ($1.92 billion) in the second quarter from a loss of 1.4 billion francs a year earlier. Last fall, UBS set out a medium-term target of 15 billion francs of annual pre-tax profit. In early afternoon trading in Zurich, the shares surged 9%. “The UBS franchise is solid. I believe their numbers will improve further into the year,” said Marc Gabelli, president of the Gabelli Group, parent of $29 billion U.S. asset manager GAMCO. “The bleed is over and now they will begin to regain share.”
Deutsche Bank raises quarterly profits despite crisis (AP)
Germany’s biggest bank, Deutsche Bank, can still hit an important 2011 target despite a slump by its key profit generator, finance director Stefan Krause said on Tuesday. “We believe we are on track to achieve this goal,” of pre-tax profit of 10 billion euros (13 billion dollars), Krause told media after the bank released second-quarter results. He did not give an outlook for this year, however. In the first half of 2010, the bank posted operating profit of 4.3 billion euros, of which just 1.5 billion came during the second quarter. “We remain very confident in investment banking for 2011″ but also in other sources of profits, Krause said in reference to the group’s top money maker.
Top 25 Highest Paid CEOs Of The Decade (WSJ)
Hey hey hey: “Four of the top 25 CEOs worked at financial companies, two on Wall Street: former Lehman Brothers CEO Richard S. Fuld, at No. 11 with $457 million, and former Citigroup Inc. CEO Sandy Weill, who ranked 19th at $361 million. The others were Mr. Fairbank and former Countrywide Financial Corp. CEO Angelo Mozilo.”
Jailed Investment Banker Asks For $2 Million Bail (Bloomberg)
Kenneth Starr, 66, would be in the custody of his wife, Diane Passage, and remain at their Manhattan apartment with an electronic monitoring ankle bracelet under curfew from 6 p.m. to 8 a.m., according to a request filed in court Monday by his lawyer, Flora Edwards. Federal prosecutors objected to the request. In detention, Mr. Starr has not been able to help in his defense because he “lacks access to the multitude of files and records as well as the technology necessary to work effectively,” according to the filing.
CIT Reports Second Quarter 2010 Net Income of $142 Million; $0.71 Per Diluted Share (BusinessWire)
“During the second quarter we continued to advance our key corporate initiatives,” said John A. Thain, Chairman and Chief Executive Officer. “We improved our funding flexibility, repaid higher cost debt, streamlined our portfolio and largely completed the build-out of our senior management team. We remain committed to increasing the value of our commercial franchises and supporting the small business and middle market sectors that are vital to the U.S. economy.”
New Chief Pledges BP Will Be ‘Good Corporate Citizen’ (CNBC)
“It’s in the fabric of the company. We want to be a good corporate citizen. We want to restore our reputation. It’s going to take time,” he said. “We’ve got to learn from this accident. We’re going to change many things in BP.” Read more »
$$$ Pay Squeeze and Job Cuts Ahead, Warn Bankers [FN]
$$$ Elizabeth Warren Would Be Bane Of Banks [NYT]
$$$ This is happening: “Cast Members Angelina, Jenni “J-Woww,” Mike “The Situation,” Nicole “Snooki,” DJ Pauly D, Ronnie, Sammi “Sweetheart” and Vinny Ring The Opening Bell on July 27” [NYSE via Heidi Moore]
$$$ Basel Committee Overseers Reach `Broad‘ Agreement on Bank Rules [Bloomberg]
Remember Ross Mandell, the Sky Capital founder who was accused of conspiracy and securities fraud in a scam that was (allegedly!) perpetrated using “boiler room-like tactics,” which could result in him going downtown for 25 years? He’s pretty sure he’s innocent and he’s like to share that innocence with the world. Read more »
We all know of and, in some cases, have personally experienced, the dangers of the drunk trader, the strung-out trader, and the trader whose estrogen levels are running perilously low. But there is a vastly more dangerous condition under which billions could be lost, though for some reason it apparently merits little attention in the press. Read more »
Think of Dick Fuld, and realize it could be worse. Read more »
Two Dudes Prove Why It’s Best To Argue CFA v. MBA Anonymously Online And Not In Person At Your Favorite Burrito JointBy Bess Levin
NO NO NO A CFA IS BETTER! (Throws chair.) Read more »
Last Friday, outgoing Compensation Kitty-Cat Kenneth Feinberg made his “huge” announcement re: the bonuses paid out to bank executives for their bang-up jobs during the 2008 calendar year. Although some (mythical) people were supposedly quaking in their boots over what Feinberg was going to do to them, his announcement amounted to saying he’d crunched the numbers and while they weren’t so great and maybe should’ve been smaller in light of what was going on at the time, even he couldn’t get it up to care anymore. For the most part, he’s not alone. Today, though, we have found one guy, who actually gives a rat’s ass. Read more »
First, the back story: Martin Coward and Elena Ambrosiadou, currently in the process of getting divorced, were once partners in business and in marriage. They met at Cambridge, fell in love, and founded hedge fund group Ikos in 1992. Math nerd-cum-ladies man Coward was “the brains” behind the investment strategy and research, while Ambrosiadou, who holds a master’s degree in business, was named chief executive, ran operations and “was a key driver of growth.” In the beginning, things went prettay prettay prettay well.
Ikos is named after an ancient Greek word for “household.” Mr. Coward and Ms. Ambrosiadou embraced a strategy known as “quant” investing, which uses computers to drive investments based on complex mathematical models, rather than relying on individuals to pick stocks. The couple’s strong performance record attracted prominent investors, people familiar with the firm say. By 2007, they had moved the business to Cyprus, with assets peaking at around $3.4 billion.
Then things started to get tense when the two began disagreeing over how to run the firm, turf, and probably whose turn it was to take out the trash. Coward was having a lot of “me time” with one person “who knows them” noting that Marty, a licensed pilot with a penchant for windsurfing, “frequently went on vacation.” While he was on one of his vacays (this one was skiing the Alps), Ambro made the executive decision to fire one of her husband’s London-based research teams without letting him know first. And Coward did not like that! Read more »