News > Financial Services

Dan Loeb’s books: Recommended reading list
Hedge Funds
<p>Daniel Seth Loeb is the founder of the New York based hedge fund Third Point LLC, which at the end of the third quarter of 2014 reported assets under management of $17.5 billion.</p> <p>The outspoken and prominent value investor founded the hedge fund in 1995 and is currently responsible for the business activities of Third Point. He is also the managing member and chairman of Third Point, LLC.</p> <p>Dan Loeb is known for his explicit public letters regarding the performance and actions of other financial executives. His mocking letters are an entertaining yet the thought-provoking approach of addressing and disapproving a certain serious issue.</p> <p>For more on Dan Loeb, head over to ValueWalk’s Dan Loeb Resource Page, where you can find a detailed rundown of his background, bio, and investment philosophy.<br /> Dan Loeb: Recommended books<br /> Reminiscences of a Stock Operator</p> <p>Edwin Lefevre. Loeb calls the book a classic. The book is the thinly disguised biography of Jesse Livermore, a remarkable character who first started speculating in New England bucket shops at the turn of the century. Livermore, who was banned from these shady operations because of his winning ways, soon moved to Wall Street where he made and lost his fortune several times over. What makes this book so valuable are the observations that Lefèvre records about investing, speculating, and the nature of the market itself.</p> <p>You Can Be a Stock Market Genius</p> <p>Joel Greenblatt. Greenblatt’s book explains how best to invest such as spin-offs, mergers, risk arbitrage, etc. Loeb uses many of the strategies discussed in this book in his own investing strategy. Loeb is now alone in his admiration of the book. Seth Klarman also recommends Greenblatt's book on his list of favorite books as detailed here.</p> <p>Financial Shenanigans</p> <p>Howard Schilit. The author details various tricks that management have used, and will continue to use in the future. They consist of various manipulations of the income statement, and the cash flow statement.</p> <p>The Art of Short Selling</p> <p>Kathryn Staley. A book about finding tricks used by management in financial statements, and using the information to short the company.</p> <p>The Power of Story</p> <p>Jim Loehr. Loeb’s favorite "non-investing" book.  Loeb stated that the book can "change your destiny in business and in life."</p>
You've Gotta Be Kidding Me: That story about a fund making $1B on Black Monday? Impossible!
Hedge Funds
<p>Remember those stories you read about a "Black Swan" fund that made $1 billion on Black Monday?</p> <p>"It's all marketing garbage," says Tom Sosnoff, a trader and co-host of TastyTrade. In a 15-minute video, Sosnoff along with his co-host Tony Battista, eviscerate a story that Mark Spitznagel of Universa Investments made $1 billion on August 24, when the Dow Jones Industrial Average plunged 10% at the open.</p> <p>It isn't even remotely possible, says Sosnoff who took out a pencil and paper to do the math.</p> <p>Battista figures that if Universa had $250 million in capital to invest in put options (which Spitznagel claimed to have deployed), the fund would have needed to trade more than 60,000 in options (in one scenario) and more than 300,000 in options, in another possible scenario. The market didn't trade anywhere near that volume. At the open, the open interest stood at 83 in the first scenario and just over 9,000 in the second.</p> <p>"This scares me," says Sosnoff. Spitznagel was splashed on every major media outlet -- from Bloomberg to The Wall Street Journal and The New York Times. "How does it work? I just don''t get it. Can't anybody do the math?"</p> <p>Watch this episode of "You've Got to Be Kidding Me" on TastyTrade and let us know what you think.</p> <p>h/t The Reformed Broker</p> <p>&nbsp;</p> <p>&nbsp;</p>
NexAmerica People Moves: Fortress exec departs; Stanford Management CEO leaves for Credit Suisse
Hedge Funds
<p>Fortress hedge fund exec departs firm. Stuart Bohart, president of the firm's hedge fund unit, is leaving the firm after five years. Fortress' macro trading business has suffered recently from disappointing performance and outflows. Bohart previously worked as co-head of Morgan Stanley's asset management unit. Wall Street Journal</p> <p>Credit Suisse hedge fund arm hires former Stanford Management CEO. John Powers, former president and CEO, is leaving the Stanford University endowment to lead Credit Suisse Asset Management's new hedge fund initiative. Powers will be launching a strategy that invests in the equity of hedge fund managers. Institutional Investor<br /> Photo: ©iStock.com/ooyoo<br /> &nbsp;</p>
NexAmerica People Moves: Northern Trust adds to Canada team; BlackRock alpha strategies head to retire
Asset Management
<p>Northern Trust added institutional sales v.p. Nick Petruccelli has joined Northern Trust for the newly created position of senior v.p. for institutional sales in Canada. Petruccelli will be responsible for building the custody and asset servicing business with pensions funds, endowments and foundations. Petruccelli most recently worked as head of sales and business development at Larsen &amp; Toubro Infotech. Pensions &amp; Investments</p> <p>BlackRock alpha strategies head to retire. Quintin Price, the lead behind the $944 billion alpha strategies group, will retire next year. Price will return to London, and will continued to work with the firm as senior advisor through next summer. The 54-year-old Price has been with the firm since 2005, and has led the alpha strategies group since its start in 2012. Reuters</p> <p>Nikko Asset Management hires institutional business head. Nikko Australia hired Eddy Schipper to the newly created role. Schipper previously worked as executive director of Asia Pacific investor relations for IFM Investors. Investor Daily<br /> Photo: ©iStock.com/ooyoo<br /> &nbsp;</p>
The China survival guide: Foreign funds change strategy
Asset Management
<p>As China’s markets are consumed by panic and paranoia, foreign investment funds are in a scramble to switch their strategies and generate some upside from the chaos, or at least mitigate some of their loses.</p> <p>According to Reuters, there have been range of responses to the implosion. Here are a few of the strategies funds are adopting to survive the rout:</p> <p>Looking to Hong kong. Those who still remain bullish on China’s long terms prospects are now looking for more opportunities in the territory where valuations are lower. Another main attraction is that the market is better regulated and less subject to whims of Beijing officials than Shanghai and Shenzhen. </p> <p>Shorting Asian currencies. While the bearish sentiment on Asian currencies has eased recently, those that still see the decline in the yuan, and fall in national exports, as a precursor to more economic pain down the line are betting against the currencies of China's Asian trading partners.</p> <p>Shorting banks with heavy China exposure. Many of the same pessimists going short on Asian currencies are also banking on the decline of those with massive China exposure, particularly UL-headquartered banks like HSBC Holdings, and Standard Chartered.  </p> <p>Buying US mortgage-backed bonds. Some are investing in this area in the expectation that the wealthy Chinese looking for a safe haven will pull capital out of China and pour it into US real estate.</p> <p>...or just staying focused on China. Instead of fleeing the mainland completely some are just becoming more targeted. Fidelity Investments, for example, is seeking value in specific high-growth business, particularly in the consumer space, that were undervalued even before the meltdown.<br /> Photo: Lwp Kommunikáció, Bear Grylls Ventures</p>
Leon Cooperman blames risk parity for market chaos
Hedge Funds
<p>Last week JPMorgan Chase &amp; Co. (NYSE:JPM) Chase &amp; Co. warned its clients that Volatility Target strategies, CTAs and Risk Parity portfolios could sell a combined total of $150 billion to $300 billion of equities during the next few weeks as momentum drives selling (Concerns Over Risk Parity Grow [Cont.])</p> <p>The report from JPMorgan came a few days after the Financial Times published an article on the risks that Risk Parity strategies posed to the global bond market. The Financial Times cited a new report from AllianceBernstein (Introduction to Tail Risk Parity an old copy of the paper can be found here), which estimates that risk parity is now a $400 billion industry. Assuming an average leverage ratio of 355%, these funds control around $1.4 trillion in assets.</p> <p>Leon Cooperman on risk parity<br /> Reports from the Financial Times, AllianceBernstein and JPMorgan all imply that Risk Parity is a disaster waiting to happen. And Leon Cooperman, the founder of Omega Advisors just joined the party.</p> <p>Within his August letter to investors, Cooperman blamed Omega's poor returns (year to date Omega's funds are down between 6% and 11% according to Omega's letter to investors reviewed by ValueWalk) on "price-insensitive" investors.</p> <p>Our investment process, grounded in fundamental company research, with a capital marketr overview designed to help us gauge appropriate risk asset exposure, has served us well since our inception 23 years ago, and we believe in its continued effectiveness. The firm has virtually no debit balance, and we like what we own.<br /> With respect to the investment outlook, we believe that shares in the U.S. will end the year higher. A slowing in China's economic growth, the surprise devaluation of the yuan in August, continued weak oil and commodity prices, and uncertainty as to the timing of the first Federal Reserve rate hike, all contributed to an initial weakness in U.S. and global equity markets in late August. However, these factors, we believe, cannot fully explain the maenitude and velocity of the decline in equity markets last month. We think that much of that decline can Ix attributed to systematic/technical investors that are price-insensitive and largely indifferent to fundamentals. Such investors include risk-parity funds, derivative hedgers, trend-following CTA's, and insurance variable-annuity programs.</p> <p>The month of August was a bad one for global risk markets and a bad one for Omega. The S&amp;P 500 dropped 6%, its worst monthly decline in over three years. Our various investment funds, excluding our Credit Opportunity Fund which eased just 1.4% last month, declined by between 9% and 11% in August. Year to date, our equity-focused funds are down between 6% and 11%; differential returns among our funds reflect </p>
A month of pain: Latest on hedge funds returns for big 5 activists
Hedge Funds
<p>August was the month of pain.</p> <p>In August, per HFR, the average fund lost 2.2% (versus the S&amp;P 500's 6% fall) and is down 1% for the year. Some big name factivists aren't so lucky.</p> <p>Bill Ackman's Pershing Square was down 9.2% in August, putting the fund down 0.1% for the year.</p> <p>Top holding Mondelez International Inc (NASDAQ:MDLZ) (MDLZ) was down 6% for the month of August, no. 2 holding Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) (VRX) was off 10.5%, no. 3 Air Products was down 2%, no. 4 Canadian Pacific (CP) was down 10%, no. 5 Zoetis (ZTS) down 8% and no. 5 Restaurant Brands (QSR) off 11%. Collectively, eight make up the bulk of the long-only portfolio.</p> <p>David Einhorn's Greenlight Capital was down 5.3% in August and now down 13.8% for the year.</p> <p>Top holdings Apple Inc. (NASDAQ:AAPL) (AAPL) and GM (GM) were down 7% and 6.6%, respectively, in August. Everyone wants to talk about SunEdison, which was off 55% for the month, with Micron Tech and CONSOL also being down 11% and 8%, respectively, for the month. Einhorn was cutting some of his long and short bets in August, though.</p> <p>Dan Loeb's Third Point was off 5.2% last month, but still up 1.2% for the year.</p> <p>Third Point's top holding, Baxter (BAX) was off 4% in August, no. 2 holding Amgen, Inc. (NASDAQ:AMGN) (AMGN) was down 14% and no. 3 Allergan (AGN) was down 8.2%. Collectively, the three make up about 40% of the long-only portfolio.</p> <p>Barry Rosenstein's JANA Partners was down 4.3% in August and down 2.9% for the year.</p> <p>JANA's top holding, Qualcomm, Inc. (NASDAQ:QCOM) (QCOM), was down 12% in August. Other top holdings off big in August were Walgreen Company (NYSE:WAG) (WBA), down 10.4%, and ConAgra (CAG), down 5.4%.<br /> Other activists down in August were Cliff Robbins' Blue Harbour, off 2.6% for the month, and Scott Ferguson's Sachem Head Capital, down 2%.<br /> Jeff Ubben's ValueAct Capital, up 1.6% in 2Q, the standout of sorts - although it remains to be seen how he did in August. YTD through June, ValueAct is up 8%.</p> <p>Learn More about activist strategy</p> <p>By all accounts, it wasn't a prett</p>
Pimco's Total Return is not the fund it once was
Asset Management
<p>Oh how the mighty have fallen. Data disclosed on Wednesday reveals Pimco’s Total Return Fund has now sunk below the $100 billion mark to $98.5 billion - a third of its size just two years ago.</p> <p>The shriveling titan has now chalked up 28 consecutive months of outflows since April 2013 when it peaked at $293 billion.</p> <p>The departure of co-founder and "Bond King" Bill Gross - who shocked the investment world by shimmying over to rival Janus Capital last year - has not helped.</p> <p>The last time the fund was this small was in 2007 before it attracted mountains of cash from investors clamoring for the safety of bonds in the wake of the financial crisis.</p> <p>On plus side the outflow has slowed. The firm said investors yanked around $1.8 billion in assets from the fund in August, compared to $2.5 billion the previous month.</p> <p>The hemorrhaging is nowhere near as bad as it was in January when the fund had cash withdrawals of $11.6 billion. The fund has also delivered returns of 0.72% so far this year, beating 85% of its category peers, Reuters reports.<br /> Photo: Eli Christman</p>
SAC alums are killing it in 2015
Hedge Funds
<p>Their padrino’s performance may have taken a hit and most of their peers may be deep in the red, but for three SAC Capital veterans, things could not be any better.</p> <p>The New York Times reports that SAC alums Jason Karp, Aaron Cowen, and Gabriel Plotkin are all set to post a banner year for 2015 as Karp’s $2.9 billion Tourbillon Capital Partners returns over 18%, Cowen’s $2 billion Suvretta Capital Management notches up a respectable 7% to 9%, while Plotkin’s $1 billion Melvin Capital posts nearly a whopping 20%.</p> <p>This is in stark contrast to how the activists are doing; Bill Ackman’s Pershing Square is down 9.2% in August, while Barry Rosenstein’s Jana Partners slumped 4.3% in the same period.</p> <p>That might not be a good comparison though. SAC Capital – or Point72 as it’s now called – has always been renowned for its ability to trade large positions tactically, allowing them to dash in and out of positions quickly compared to activists who are typically invested in their targets for a long-ish haul.</p> <p>There’s still three months to go in the year though, so stay tuned. Who knows what the rest 2015 will bring.</p> <p>Photo: Insider Monkey</p>
Shanghai Chaos Investment loses millions on…Shanghai chaos
Asset Management
<p>Shanghai Chaos Investment, arguably one of the coolest-named asset managers currently out there, ironically got caught in Shanghai’s chaos the past few months.</p> <p>According to Reuters, two of firm’s funds posted serious losses since the Shanghai Composite’s mid-June peak. Chaos Value 1, the firm’s $17.3 million 20-year fund, lost a staggering 63% during that time frame, while Chaos Value 2, an open-ended, $440 million fund, lost a whopping 33%. Reuters does add however, that the former is still up 50% since its July 2014 launch.</p> <p>The funds apparently took a beating when commodity prices – as well as stock index futures – plummeted alongside the Chinese equity markets.</p> <p>The firm does seem upbeat on their prospects though:<br /> “Excessive panic after the market slump is a huge risk, just like excessive optimism was during the market surge," Chaos said in the letter. "We have opportunities to buy those equities that match our values at low prices.”<br /> Photo: John Koetsier</p>