SEC Sues Priest/Hedge Fund Manager for Stock Manipulation

September 18, 2018 James Heinsman Hedge Fund News

The SEC filed a suit against Emmanuel Lemelson, a Massachusetts priest who also works as a hedge fund manager, for publishing false “research reports” in order to push the share price of Ligand Pharmaceuticals, Inc, down.

The suit accuses Lemelson and his firm Lemelson Capital Management, of publishing misleading/false reports on popular investing websites like Seeking Alpha in order to manipulate the stock price. The SEC is seeking to recover illegal profits as well as a fine whose amount has not been disclosed.

Lemelson, who is 42, said in a statement that the SEC suit “has no merit and amounts to gross abuse of prosecutorial discretion.”

“The commission chose to bring this case based upon its enforcement staff’s personal feelings and facts be damned, win-at-any cost ambitions,” said the statement. “The government’s claims are false and will be proven to be so.”

In May 2014 Lemelson bet that the share price of Ligand Pharmaceuticals would drop. He then published reports that made negative statements about the drug company, including that the company was about to go bankrupt, according to the SEC. Lemelson wrote and published five reports, and by October the price of Ligand shares lost 34%. Lemelson successfully covered his bet, making around $1.3 million for one of his hedge funds, Amvona Fund, stated the SEC.

As an ordained Greek Orthodox priest Lemelson is allowed to hold jobs outside their religious duties, as well as to marry. The priest/fund manager has been in the news before: in October 2015 the Wall Street Journal did a profile on him. The article stated that he managed about $20 million and had made millions of dollars for his clients. He was quoted in the article as saying, “my whole life I always knew things before they happened. I guess it’s just a gift from God.”

In March 2016 Lemelson tried to sue Bloomberg for a report it published stating that the SEC was investigating his trades. The lawsuit was unsuccessful.

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Emmanuel Lemelson, Lemelson Capital Management, Ligand Pharmaceuticals, SEC, stock manipulation,

After Six Years Tide Point Shutting Doors

September 11, 2018 James Heinsman Hedge Fund News

The six-year-old hedge fund Tide Point Capital Management is closing down due to the personal desire of the majority owner. It is just one more causality in a long line of closed funds in this hurting $3 trillion industry.

Based in Old Greenwich, Connecticut, Christopher Winham founded the fund in 2012. He served as the fund’s majority owner and chief investment officer. In recent weeks the fund controlled $800 million in assets.

Winham told his investors last week that his decision to close the fund was purely personal and due to his desire to spend more time with his family. He spent almost 25 years on Wall Street, working at Goldman Sachs and Steven A. Cohen’s hedge fund SAC Capital. He also worked at Diamondback Capital, founded by SAC graduates. But Windham told his investors that the industry has changed a lot since those earlier days.

The past few years have proved challenging for small to medium sized hedge fund to raise fresh money and to stay afloat. Many investors are disillusioned with the poor results caused by weak returns and high management fees. A lot of money has moved to less expensive index funds as the stock market continued its climb over recent years.

The numbers speak for themselves: In the first eight months of 2018 hedge funds had an average global return of 1.89% while the S&P 500 Index rose by almost 8% during the same time. The first quarter of 2018 saw 145 hedge funds shuttering, although 158 new funds opened their doors to investors.

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Research on Gun Violence Funded by Hedge Fund Billionaire

September 3, 2018 James Heinsman In the News

John Arnold used to be an energy trader. He launched is own hedge fund firm after working for a while at Enron. He built up a fortune and decided to retire at the age of 38 with an estimated net worth of about $3.3 billion.

Arnold and his wife Laura created a foundation which strives to rely on scientific studies to influence public policy. The goal is to produce a body of evidence which both sides of an issue will trust.

“We are about evidence, where the truth takes us,” said Jeremy Travis, the foundation’s senior vice president of criminal justice. “We’re not on one side or another of the gun debates that are really dividing the country. We are interested in testing ideas and finding out what works.”

The Laura and John Arnold Foundation is now turning its resources towards investigating the issue of gun violence in the United States. They are now in the process of bringing together a group of private funders to spend about $50 million on research on gun violence as a public safety issue. When the studies have answers, the Foundation hopes to put pressure on government to do additional research and legislate policies that will be effective in reducing gun violence in the country.

The Foundation has invited the NRA to join the initiative in the hopes that the powerful anti-gun-control lobby will then be a player in improving the situation rather than an impediment to solutions.

“(There’s a) tendency in the gun violence issue that’s the most troubling,” said Travis. “Evidence is seen of value only if it supports a position. Every once in a while, you want to be surprised.”

Last year the Journal of the American Medical Association said that from 2004 to 2015, research on gun violence was severely “underfunded and understudied” in comparison with other important causes of death in the country.

The RAND Foundation was picked by the Laura and John Arnold Foundation to oversee the project. RAND has its own initiative called “Gun Policy in America.”

Some of the subjects with the Foundation listed as priorities will be:

  • What are the characteristics of gun violence?
  • What are the risk and protective factors?
  • What are gun violence interventions?

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gun violence, John Arnold, Laura and John Arnold Foundation, NRA, RAND Foundation,

Women Still Don’t Have a Place at the Hedge Fund Table

August 29, 2018 James Heinsman In the News

Great strides have been made by women in the financial services industry, but one place that is still mostly closed to them is the hedge fund sector, where they work pretty much everywhere, accept where the money is.

Out of the 50 largest US hedge funds only two have women in the role of top investment executive. The same group of 50 about half of them can boast women at the head, or co-heading, the investor relations department. Investment teams are exceedingly male, which many industry executives say is just an extreme example of the larger financial world where women for the most part occupy lower-paying jobs.

The winnowing starts early: men are escorted into companies as traders or analysts after doing entry-level work in investment banking or private equity. They learn how to buy stocks, bonds and other assets for the client funds they work for. This is called the “front office,” where just about every billionaire hedge-fund manager works.

Women are treated differently from the get-go. They are sent to “middle-office” or “back-office” jobs dealing with operational and marketing issues. They frequently go into investor-relations, or what are known as “capital-introduction” jobs. These jobs are lower paying, and do not involve, for the most part, making important investment decisions.
These jobs can be crucial to keep a fund rolling along, but they can also be nothing more than promotional staff who are hired to act as bait to reel investors into investing by catering to male egos.

“It’s a vicious cycle,” says Dominique Mielle, recently retired as the only female investing partner at hedge-fund giant Canyon Capital. “The only women we know that exist at hedge funds are in IR or sales, and therefore that’s where they put them.”

“The whole mind-set is: There’s this gorgeous babe at home, and I’m going to have this gorgeous babe in the office, because what does that say about me? I’m surrounded by gorgeous babes,” says Marjorie Kaufman, a 30-year industry veteran.

One women with an Ivy League degree in economics explained how she was hired for an investment job, but soon was switched into marketing. When it was clear she was not interested in this part of the business, she was offered a buyout to leave. Her hedge fund career ended then, after less than one year.

Some women prefer their jobs in marketing, saying it allows them more freedom and time to spent with their families. One woman said:

“I don’t work crazy hours, I’m not here at 3 a.m. crunching a spreadsheet, I can go to my kids’ parties and open up my laptop and do my job.”

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Dominique Mielle, Hedge Funds, Marjorie Kaufman, women,

Some ETFs that are Performing Like Hedge Funds, Just Cheaper

August 21, 2018 James Heinsman Hedge Fund News

Hedge funds have been investment vehicles traditionally accessible only to the most net-worth individuals, or institutional investors. As the name implies, they are designed not just to maximize returns, but to minimize the volatility of the market, or hedge against downturns that are inevitable in all economies and marketplaces.

This type of money management comes at a price, typically 1-2 percent for managing the fund, and an additional performance fee, which can be as much 20 percent, or sometimes even more, of profits. Hedge fund ETFs charge between 0.50-0.75 percent of AUM, with no performance fees.

The following video describes how electronically traded funds can use the same strategies as hedge funds, but for a fraction of the fees.

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Number of Crypto Hedge Funds Growing Faster than Expected

August 13, 2018 James Heinsman Hedge Fund News

A survey conducted by Crypto Fund Research revealed that cryptocurrency investment funds grew at a better than expected rate during 2018, hinting that the greater investment community is beginning to give legitimacy to the digital currency as an investment vehicle.

The study showed that there were 466 cryptocurrency investment funds in the US, the majority (255) are marketed as hedge funds. Of those 255, 195 are venture capital funds and 16 represent private equity funds.

According to the present rate of growth of these funds the study predicts that there will be 165 new cryptocurrency funds by the end of 2018, beating the 2017 figure of 156, a record.

Most funds of this variety have only $10 million or less in holdings. There are only 28 funds with over $100 million. This group of better endowed funds include: Arrington XRP, Novogratz’s Galaxy Digital Assets, Polychain Capital, and more. Together the funds control about $7.1 billion in assets.

Founder of Crypto Fund Research, Josh Gnaizda, says the large growth is unexpected considering the downturn of cryptocurrency prices:

“We expected a large number of new crypto funds to launch in 2018 to satisfy growing investor demand. However, the pace of new fund launches is a bit surprising given the dual headwinds of depressed prices and less than favorable regulatory conditions in many regions,” said Gnaizda.

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Crypto Fund Research, cryptocurrency, Josh Gnaizda,

Einhorn’s Greenlight Continues Decline

August 5, 2018 James Heinsman Hedge Fund News

Iconic hedge fund manager David Einhorn continued to see his Greenlight Capital fund decline in value. During the second quarter of 2018 the fund lost 5.4% and an 18.3% loss this year to date. Much of the decline has been due to short bets gone wrong, including Netflix and Athena Health.
For a more in-depth understanding of Greenlight’s troubles, listen to the video below:

David Einhorn’s hedge fund suffers more losses, especially from shorting Tesla from CNBC.

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Athenahealth, David Einhorn, Greenlight Capital, Netflix, Tesla,

Investors Take A Bite Out of FANG

July 29, 2018 James Heinsman Hedge Fund News

Acronym lovers will most likely be searching for another letter to replace the “F” in “FANG” since Facebook’s 19% plunge in value last week. FANG is an abbreviation created by Jim Cramer of “The Street” several years ago as a quick way to refer to Wall Street’s best and brightest: Facebook, Amazon, Netflix and Google. These four giants have been among the best performing and best loved companies in recent memory, but now Facebook is shaking the boat.

According to analysts, Facebook was the most loved of the FANG Four. Of 848 hedge funds with $1.6 billion worth of bets, Facebook was in the top 10 holdings of 97 of them, says Goldman Sachs’ “Hedge Fund Trend Monitor.” Together the hedge-fund stake made up 5% of Facebook’s equity shares outstanding. The 19% drop in stock value translates to a total loss of close to $6 billion from the stock. The market cap loss totaled $119 billion.

Among the hedge funds most affected are:

  • Viking Global: $390 million loss
  • Lone Pine Capital: $330 million loss
  • Appaloosa Management: $259 million loss
  • Tiger Global: $207 million loss

The epic downturn was triggered by data leaks and fake news scandals going back to the news that Cambridge Analytica had access to and used information about Facebook users without their, or Facebook’s, knowledge, back in March 2018. Facebook announced that as many as 87 million users may have been wrongly shared with Cambridge Analytica, a British political consulting firm, which helped President Trump’s presidential campaign in 2016.

That news led to worry about Facebook’s broader oversight of its platform, and an FTC investigation into whether the company broke a 2012 settlement under which it’s required to give the social network’s users notice and obtain consent before sharing their information. Mark Zuckerberg, the company’s CEO and founder was called to testify to Congress in April.

In 2017 Facebook’s stock climbed 53%, easily outpacing the S&P 500’s 19.4% growth. After the crash Facebook is now unchanged for 2018 compared to 6.2% growth of the S&P. Nevertheless, even though hedge funds may have sold their position in Facebook during the months after the scandal, it is still likely to be a top holding, as it was going into the earnings report as the shared hit an historic high last Wednesday.

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Appaloosa Management, Facebook, FANG, Lone Pine Capital, Tiger Global,

Castle Harlan Press Release: Launch of Titan Production Equipment

July 21, 2018 James Heinsman Company Spotlight

Exterran sells production equipment business, creating new local company

Titan Production Equipment has launched in The Woodlands, the company announced in a July 11 press release.

The company was created through the sale of Houston-based Exterran Corp.’s (NYSE: EXTN) North American production equipment manufacturing assets to an affiliate of New York-based private equity firm Castle Harlan Inc. The deal was announced in April but financial terms were not disclosed.

In an April press release, Exterran said the sale would help the company accelerate growth “by focusing as a systems and process company for oil, gas, water and power.” Exterran will continue manufacturing production equipment outside of North America and will offer production equipment in North America through Titan, Exterran’s preferred supplier for the region, per the April release.

For the rest of this article, click here.

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Castle Harlan, Exterran, Titan Production Equipment,

Credit Suisse Cut More Jobs as Part of Three-Year Plan

July 14, 2018 James Heinsman Company Spotlight

The New York hedge fund division of Credit Suisse has been re-organizing. In late June-early July, seven positions were trimmed at the company’s key brokerage unit. Included in the cuts were senior bankers Tony Bertoldo and Justin Carey. Others asked to leave were Philippe Hatstadt and Ralane Bonn. Not all are fired; some will be moved to other positions in the company.

Credit Suisse is Switzerland’s second-biggest lender. It is now in the last stages of a restructuring that has been going on for three years. The company has been improving its wealth-management division and limiting capital allocation to only trading-related transactions.

The late June shake-up came on the heels of previous walks which included Indrajit Bardhan, who was the global head of prime brokerage. Along with Bardhan, Michael Wingertzahn and Gardy Berthoumieux were dismissed. Paul Galietto replaced Bardhan.
Credit Suisse has been subject to the same pressure from stricter capital requirements as other investment banks around the world. In addition, the absence of volatility negatively effects revenue. Still, Suisse’s Global Markets section adds 26 percent to the group’s revenue.

The overhaul resulted in thousands of job cuts in New York and London, but other areas of the bank are expected to grow, including leveraged finance, some parts of equities trading, and a special unit named Advanced Execution services, with Anthony Abenante in charge.

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Credit Suisse, firing, hiring, Indrajit Bardhan, Paul Galietto,

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