Long-Term Capital Management co-founder Robert Merton, former Maverick Capital chief macroeconomic strategist Steve Galbraith and Massachusetts Institute of Technology’s Andrew Lo were recently named by the U.S. Treasury to serve on the Financial Research Advisory Committee of the Office of Financial Research. The Dodd-Frank Act established the OFR within Treasury to “serve the Financial Stability Oversight Council, its member agencies, and the public by improving the quality, transparency, and accessibility of financial data and information; conducting and sponsoring research related to financial stability; and promoting best practices in risk management,” according to a Treasury statement. [Hedge Fund Intelligence]
SAC Capital Advisors LP, the $14 billion hedge fund run by Steven A. Cohen, plans to hold a conference call with clients tomorrow, according to an investor who asked not to be named because the information is private. SAC executives have reached out to the firm’s largest investors to calm concern about Cohen’s trading in Elan Corp. and Wyeth LLC after prosecutors for the first time tied the hedge-fund founder to a specific transaction at the center of an insider-trading investigation. [Bloomberg, related, earlier]
Former SAC Capital Advisors LP portfolio manager Mathew Martoma, charged in what prosecutors called the biggest-ever insider trading case, appeared in federal court in New York…He was arrested at his Boca Raton, Florida, home Nov. 20 and freed on $5 million bond. He appeared today before U.S. Magistrate Judge James Cott in Manhattan. The defense and prosecution today agreed to a modified bail package under which the $5 million bond must be secured by $2 million in cash or property, as well as signatures from three instead of two financially responsible people. Martoma has surrendered his and his children’s travel documents. He’s limited to Florida, Massachusetts, New Jersey and parts of New York. [Bloomberg]
Just a question of which hedge fund he’ll be riding– his own or his former Old Lane colleague’s. Read more »
Time was, making hundreds of millions of dollars one minute and losing hundreds of millions the next got Greg Coffey’s blood pumping. Now? Eh. Who cares? What’s the point? Read more »
SEC Advises Investors To Read Hedge Fund Documents, Especially The Secret Ones Containing All The FraudBy Matt Levine
I think if I were running a small hedge fund far from prying eyes, every quarter I’d take a look at my performance and decide if I felt good about it, and then (1) if I did I’d take a nice chunk of the profits for myself and (2) if I didn’t then I’d drink until I felt better and GOTO (1). Also I’m sure that when I started I’d plan to take a percentage of whatever I earned over some benchmark, and day one that benchmark would be, like, some relevant index matching the style of my fund, but over time it’d creep down to “well 0% is a benchmark” and then, I mean, negative 10% is a benchmark too is it not? What is special about zero? And if investors asked “can you explain your fees?” I’d just yell “can you explain YOUR fees?” and wander off muttering to myself. Scott Ferguson, hire us!1
According to the September 2001 Agreement, GEI Management was entitled to a quarterly annual management fee of three percent of the net asset value of the Fund. GEI Management also received a quarterly performance fee – called an “incentive allocation.” This fee was subject to a high water mark and a benchmark. The Fund paid a performance fee to GEI Management only if the Fund produced net profits over the prior quarter and on a cumulative basis from the Fund’s inception in 2001. If these conditions were met, GEI Management received an incentive fee equal to 25 percent of the amount by which net profits exceeded the performance of the S&P Healthcare Index.
But what if GEI underperformed the S&P Healthcare Index? A careful reading suggests that then they wouldn’t get performance fees, which hardly seems fair, because underperformance is after all a kind of performance. This is solvable by amending the agreement, which GEI did (deleting the cumulative high water mark and the benchmark, i.e. giving them all profits above zero). Further careful reading of the agreement suggests that they needed 75% of outside investors to agree to this amendment, but that was solvable by ignoring it: Read more »
SAC Capital Advisors LP, the hedge fund run by Steven A. Cohen, put portfolio manager Michael Steinberg on leave after he emerged as an unindicted co- conspirator in a $62 million insider-trading scheme, according to two people familiar with the matter…Steinberg, who worked at SAC Capital’s Sigma Capital Management unit, is the fifth person to be tied to the U.S. government’s insider-trading investigation while employed at the firm. He has been linked in court documents to the securities- fraud case of Jon Horvath, a former SAC Capital technology analyst that he supervised. Horvath told a federal judge in New York during his Sept. 28 plea that he was part of a group of analysts who passed nonpublic information to each other…SAC Capital said in a statement last week that it gave Horvath “the benefit of the presumption of innocence” and that it was “disappointed and angered” to learn that he admittedly violated the law and SAC Capital’s policies forbidding insider trading. [Bloomberg]
Novelty currency dealer and possibly somewhat hedge-fund-esque entity CapitalistPig Asset Management have made some mistakes in their time – sending us unsolicited Nazi coins,1 quoting Ayn Rand in public, advertising their hedge fund in Crain’s Chicago Business, doing it before the SEC’s proposed rules allowing hedge fund advertising go into effect – but they were kind enough to send us a copy and a note saying “Proud to be the first hedge fund to advertise publicly since 1932.” So the least we can do is give them some additional free advertising here. The rest of you will have to pay. Also? Maybe wait until it’s legal. Read more »
I don’t follow NASCAR, and it’s possible that this puts me out of touch with the bulk of stock market investors, but I feel like there’s a person or robot who regrets writing this sentence last Wednesday:1
Office Depot Inc. stock surged 16.40% to $2.20 after the company announced that Tony Stewart, driver of the No. 14 Office Depot/Mobil 1 Chevrolet in the NASCAR(R) Sprint Cup Series(TM), will join the Foundation to donate 6,000 new sackpacks to non-profit organizations, schools, and agencies in and around the Chicagoland area.
Doing some math, ODP’s 285 million outstanding shares times Wednesday’s forty cent move gives you $114mm of market cap added on Wednesday, which works out to $19,000 per donated sackpack, which seems like a lot, though I cannot be sure since I don’t exactly know what a sackpack is.2
Other possibilities present themselves. Here is Starboard Value LP’s Form 4 filed today, noting among other things that Starboard bought 3.1 million shares – about half a day’s volume – last Wednesday at an average price of $2.21. It kept going, totting up a total of 8.2mm shares in the last three days of last week, which, added to some other shares that it acquired earlier (in the month? week? day?3), gave it a total of 38mm shares, or 13.3% of the company. Also some interest in where things are headed: Read more »
Hardcore Harvard Investment Group Soliciting Student Partners Who Aren’t Afraid To Take Some Risks With Their Parents’ MoneyBy Bess Levin
You’re a Harvard undergrad and you want to beef up your resume so that in a couple years, top hedge funds will be begging you to take meetings with them. You figure joining some sort of on-campus investor group might do the trick, but there are so many to choose from it’s difficult to figure out which one is going to be your ticket to the big leagues. Except it’s not actually that difficult at all. In fact, the answer is quite simple. There are student investment clubs and there is Black Diamond Capital Investors. The former, piddling little after-school programs for, when it comes down to it, amateurs. The latter, an opportunity to put your balls on the table and make some real money. Read more »
The day when you can advertise your hedge fund on Dealbreaker creeps ever closer, so claim your spot now because they are going fast.* The SEC has shown some justifiable skepticism about implementing the JOBS Act, and at least SEC-ster thinks that it’s been dragging its feet on the hedge fund advertising rules, but still, it has to be said, when the SEC was told to let you advertise your hedge fund, they really let you advertise your hedge fund. Soon you will be able to:
- say whatever you want about your hedge fund, and
- not say whatever you don’t want to say about it, as long as
- you take reasonable steps to actually sell it only to accredited investors.
Each of those things is a little surprising, no? First, there are no apparent restrictions on advertising – as DealBook says, “The commission was also mum on what sort of advertising would be allowed – can a hedge fund rent the Goodyear blimp, or will newspapers be the upper limit of public exposure?” You know who has blimp-sized plans? Of course you do: Read more »