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David Tepper is “not as bullish” on the short term
Hedge Funds
<p>David Tepper, arguably one of the most successful (and volatile) hedge fund managers currently in action, recently told CNBC that he’s “not as bullish” as he could be – a terrible sign for the markets since he thinks being a bear is the work of Satan.</p> <p>In an interview with CNBC’s “Squawk Box,” the always-optimistic Tepper said that he has “problems with earnings growth [and] problems with multiples,” alluding to the high expectations currently embedded in the market, and added that you should “really make sure that you have some cash” if you invest in it because he sees a 10% to 20% correction on the horizon.</p> <p>As for Appaloosa, it’s on defense mode right now: “we have some longs and shorts and we're hedged in, but we don't have a huge equity book right now.”</p> <p>He also has issues with China, saying that they “just keep making policy mistake, after policy mistake, after policy mistake over there,” adding that while he knows there’s a learning curve in becoming a market-based economy, doing it in real time is “kind of bad when they're a $10 trillion or $11 trillion economy and they influence more than a third of the world's economy.”</p> <p>He’s bullish on the long term though, stating further that if the market fell 20% or more, he’d be a buyer.<br /> Photo: Sam valadi</p>
The most consistent performing hedge funds over the past five years
Hedge Funds
<p>Preqin issues league tables of funds that have consistently generated higher returns and lower volatility than their peers.</p> <p>Drawing on data compiled for the 2015 Preqin Alternative Assets Performance Monitor, Preqin has created league tables of Hedge Funds that have most consistently delivered strong, stable performance. The league tables do not seek in any way to endorse these funds, but rather to illustrate those that have performed the most consistently over the period June 2010 – June 2015. Seven top-level strategies are represented – Equity, Macro, Event Driven, Credit, Relative Value, Multi-Strategy, and CTA – with all of the top 10 equity strategies funds scoring over 90 out of 100 across all metrics.</p> <p>Methodology:<br /> From its Hedge Fund Analyst database of over 12,000 hedge funds, Preqin ranked the 1,358 qualifying funds (those with a full performance record of at least five years) using a percentile rank methodology over each of the following metrics: annualized return, volatility, Sharpe ratio and Sortino ratio. The score of each fund was then derived through an equally weighted average of the four percentile values, and used to determine the fund’s Consistency Rating. Where a Sortino ratio could not be calculated (due to the fund not generating a negative return in the sample period) the fund was given a percentile score of 100 for its Sortino ratio metric.</p> <p>Most Consistent Performing Hedge Funds:</p> <p> Equity Strategies – All of the top 10 consistent performing equity strategies funds scored in the 90th percentile for each metric. The highest score was for the Peregrine High Growth Fund, with a Consistency Rating of 95.5. Peregrine Capital and 36ONE Asset Management each had two funds in the top five.<br /> Macro Strategies – The top macro strategies Consistency Rating was 96.7 for the BNY Mellon ARX Extra FIM fund. ARX Investimentos and Verde Asset Management had three and four funds respectively in the top ten.<br /> Event Driven Strategies – The top ranked event driven strategies fund was Altum Credit Fund, run by Altum Capital Management, which scored 88.0.<br /> Credit Strategies – Capitania Multi Credito Privado FIC FIM, with a Consistency Rating of 91.7, was ranked leading credit strategies fund. III Capital Management had two funds in the top ten.<br /> Relative Value Strategies – The Peregrine Capital Pure Hedge Fund scored 93.5. III Capital Management also had a further two of the top ten funds in this strategy.<br /> Multi-Strategy – The TRZ Funds Global Arbitrage Fund had the top Consistency Rating of 95.7. Six of the top ten scoring multi-strategy funds are based in Brazil.<br /> CTAs – The top score for CTAs, and the highest Consistency Rating of any top-level strategy, was for the Global Sigma Plus fund, run by the Global Sigma Group, which scored 98.5.</p>
Howard Marks still sees opportunity in China
Hedge Funds
<p>While most of his hedge fund brethren rush for the exit at the mere mention of China, Oaktree Capital’s Howard Marks says there’s still a lot of good buys in the region. And not only that, he sees a “bright future” ahead of it as well.</p> <p>Granted, Marks is known as a distressed asset wunderkind, so his view may differ than the Bill Ackman’s and the Ray Dalio’s of the world, but surprisingly, the SCMP reports that most of his positions in the region aren't in his bread and butter non-performing loans or bankrupt companies, rather, they're mostly in listed Chinese equities.<br /> “We have found equities in China that have been worth holding…We strongly believe in the A-share market…We have a substantial position in Chinese equities today and we are very comfortable.”<br /> He also said that there were a lot of good buys when the SHCOMP hit the 3,100 level, especially in contrast to its earlier high of 5,200 points. He didn’t share which stocks he was talking about though, which would’ve been great to hear given that the index is still below 3,200.</p> <p>Anyway, despite all that A-share talk, the man behind the world’s largest distressed-asset fund still has an eye on the region’s various bad debts, and is hoping to ramp up his holdings of them if he can:<br /> “Oaktree made its first investment in non-performing loans in May and would continue, he said.</p> <p>‘NPL investment will be a good idea if banks are willing to sell them at reasonable prices, which we believe to provide good return,’ he said.”<br /> With the market going the way it is, he just might have a lot of those pretty soon.<br /> Photo: Ade Russell</p>
Boston HF does away with 2 and 20
Hedge Funds
<p>We all know how hedge fund fees work. We give them an x amount of money, and then they charge us around 2% off that as a management fee. They then try to make a y amount of money using our x, and then charge us a 20% performance fee from the y that they made. What if they lose money? Well, there’s usually a clawback clause for that – but they still get to keep the 2%.</p> <p>It’s been that way for decades, millennia even, given that Alfred Winslow Jones copped the formula off Phoenician sailors. Two ex-Harvard endowment people however, seem to be trying to change that:<br /> “A pair of former Harvard University endowment executives have built the world’s largest stock-focused hedge fund with the opposite approach. Robert Atchinson and Phillip Gross let investors in their $28 billion Adage Capital Management LP keep almost all of their trading gains—and promise refunds if the fund’s performance falters.”<br /> According to the Wall Street Journal, Adage Capital charges just 0.5% annually plus 20% off gains in excess of the S&amp;P 500’s return. While that doesn’t look particularly anomalous at first glance, here’s the kicker: they keep half of their performance fee locked away for the rest of the year, and it gets awarded to them only if they beat the S&amp;P in the following year. What happens if they fall short? Well, it goes back to investors as a refund.</p> <p>The break from “tradition” seems to have brought Adage its fair share of fans; the firm saw its assets under management balloon from nearly $4 billion in 2001 to $28 billion in 2015, and ex-Harvard endowment head Jack Meyer had nothing but good things to say about their fee structure:<br /> “That’s how I think the world should look…I’m surprised it has taken the world so long to get there.”<br /> It has cost them a King’s ransom in fees though. Last year, when the fund was up 18.4%, Adage divvied up just $400 million in fees among its 26-strong staff, a massive sum by any measure, but still much less than an over $1 billion take they would have claimed had they done the usual 2 and 20 structure. No one seems to be complaining however, as the firm’s crew seems to be more interested in winning that getting on the Forbes list.</p> <p>Also impressive is the fact that they’ve only paid refunds on two occasions: in 2002 and in 2008, when the fund trailed the S&amp;P by 0.18% and 0.75% respectively.</p> <p>It also raises the question though; if their fee structure catches on – which I think it will – what does that mean for absolute return? I thought that was the whole point of hedge funds in the first place – to not be tied down by some benchmark and to just focus on making money, bull or bear market.</p> <p>Its different strokes I guess, but still, I'm curious what you have to say.<br /> Photo: GotCredit</p>
Questions we should be asking about Ackman vs Herbalife
Hedge Funds
<p>Herbalife has launched a second video attacking  short-selling activist investor Bill Ackman. It is the latest salvo in a war that has now rumbled on for three years.</p> <p>Ackman took a massive $1 billion short position on the nutritional supplement firm in 2012 and since then he has been on a crusade to bring down the firm. His firm Pershing Square Capital even launched a website comparing its multilevel marketing (MLM) business model to a giant pyramid scheme.</p> <p>The battle between Ackman and Herbalife is unprecedented in its longevity and scale. It has backfired for Ackman too. Changes brought about by Ackman's activism have ironically helped the company go from strength to strength.</p> <p>It is a case that Fortune predicts will be studied for years to come, and rightly so. It raises a number of questions, not just about Herbalife, but questions like: is the $34.5 billion MLM industry really just a giant pyramind scheme as Ackman suggests? More importantly: do activist investors make for effective regulators?</p> <p>It's clear Ackman is not only shaping the future of Herbalife, but will no doubt - for better or worse - shape how the businesses community will deal with activist investors for years to come.<br /> Photo: UniversityBlogSpot<br /> &nbsp;</p>
Chanos tells CNBC that Tesla and Solar City are shorts
Hedge Funds
<p>"Amazon is a great business," Jim Chanos tells CNBC Squawk Box. The founder and president of Kynikos founder says, however: "It's a lot less attractive today than it was a few years ago."</p> <p>Also in the interview, Chanos shares his views on the computer hardware business and other of his favorite shorts.</p>
The best (and worst) hedge funds so far in 2015
Hedge Funds
<p>Julian Robertson’s cubs may have been roarin’ so far this year but as good as their performance was, it wasn’t good enough for them to crack into the top five.</p> <p>Zero Hedge has just released a 20 best (and worst) performing hedge funds for 2015 list and surprisingly, none of the usual suspects – save for John Burbank’s Passport Capital – were on it.</p> <p>Burbank’s Passport Special Opportunities Fund came in third this year with a huge 29.18% return through July 31, while Simon Sadler’s Segantii Asia-Pacific Equity Multi-Strategy Fund came in second with an eye-popping 32.19% return through August 28. Topping them all though is Joseph Edelman’s Perceptive Life Sciences Offshore Fund, which boasts a Druckemiller-esque 35.34% return through August 21. Here’s the rest of the top five:</p> <p>Place<br /> Fund name<br /> Return<br /> Date</p> <p>4th<br /> Lucerne Capital Fund<br /> 23.33%<br /> July 31</p> <p>5th<br /> Alcentra Global Special Situations Fund<br /> 22.79%<br /> July 31</p> <p>And here are the bottom three:</p> <p>Fund name<br /> Return<br /> Date</p> <p>Dorset Energy Fund<br /> -24.54%<br /> August 28</p> <p>Elm Ridge Capital Partners<br /> -18.04%<br /> August 31</p> <p>Tulip Trend Fund<br /> -16.73%<br /> August 31</p> <p>Forever haters, Zero Hedge would like to point out that John Paulson has stopped publishing his performance figures entirely.<br /> Photo: Damon Green</p>
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>