Hedge fund manager Daniel Arbess has decided his Xerion fund has outlived its usefulness and will shut it down in December.
Arbess, a high-profile manager who often appears on business television programs, has managed the fund since 2002. At its peak Xerion, which was purchased by Perella Weinberg Partners in 2007, had over $3 billion under management. Today, as it shuts down, the fund is valued at $600 million.
Of the 12 years of the fund’s existence, it only experienced two down years, one of them this past year, losing 2 percent in the current volatile market.
Well known for his public prediction of economic trends, Arbess presented his favorite stocks at the yearly Ira Sohn Investment Research Conference.
Xerion made money from early investments in companies with exposure to the economic boom in China. The fund was also ahead of the pack by purchasing senior debt issued by the troubled car manufacturer Chrysler before the housing downturn.
In more recent years the fund has been reeling from the economic crisis. During 2011 the fund had its worst performance, an annual loss of 21 percent. Since then the fund has been positioned mostly on the defensive, making it hard to climb out of its slump. Nevertheless, over the course of the 12 years of the fund’s existence it has posted an average annualized yield of 11 percent after fees.
According to a survey by New York-based Glocap Search LLC, money manager at hedge-fund companies that manage over $4 billion earned about $2.4 million so far this year. That number reflects an 8 percent increase over last year’s earnings.
Glocap, an executive-search firm, added that compensation for senior traders and analysts at big companies with average industry performance climbed about 5 percent. That rise was partly fueled by competition from private-equity firms and banks. Analysts took home about $372,000 in salary and bonuses, according to the survey.
“Hedge-fund bonus pools continue to grow in 2014, inflated by management fee income, even if the performance contributions are more variable,” Anthony Keizner, the head of Glocap’s hedge fund practice, said.
Data provider Hedge Fund Research said that the amount of money invested in the global hedge-fund industry rose to $2.8 trillion in 2014. There was a corresponding rise of 2 percent in Bloomberg’s Global Aggregate Hedge Fund Index.
Two years ago Bill Ackman announced at a Manhattan business conference that his hedge fund firm Pershing Square Capital Management took a $1 billion short position on the Los Angeles-based nutrition supplements giant Herbalife. In other words, Ackman was betting on the company’s demise.
Since then Ackman has not stopped railing about the deceitful practices of the company, calling it a pyramid scheme which targets the poor. He calls the company “the best-managed pyramid scheme in the history of the world.”
Two years on and Ackman is still tilting at windmills, and Herbalife has even had a rise in its stock price after a slick presentation of their business strategy this past July.
Has Ackman given up on his crusade? Not at all. He has just changed strategies. Instead of trying to get the public to turn against Herbalife, Ackman is aiming his sights now at Congress. With the aid of a few DC lobbying firms he is trying to enlist the support of Democrats, especially those in the Latino caucus, since a large number of Herbalife’s clientele (victims) are from the Latino community. Ackman would like to see the threat of an investigation by the Federal Trade Commission do what his appeal to the hearts and mind of the public did not: bring down the company.
Not all capitalists see this as a good thing, however.
“It’s terrifying,” said Veronique de Rugy, a senior research fellow at the free-market Mercatus Center at George Mason University in Virginia:
“This is the danger of a government that is almost limitless in its power and reach. It gives private actors the incentive to use government influence to manipulate the marketplace.”
Ackman claims he is not in this to make a profit. He has called Herbalife’s profits “blood money” and has declared that any money he makes from his short position will be donated to charity.
Two former employees of Bridgewater Associates are being sued for falsely representing the jobs they had with the world’s largest hedge fund company.
Howard Wang and Wenquan ‘Robert’ Wu were sued in federal court in Manhattan last Tuesday for using lies about their former job descriptions at Bridgewater in order to promote their newly launched hedge fund, Convoy Investments. The suit states that Wang and Wu described themselves as “former key figures responsible for core aspects of Bridgewater’s business,” but “they were nothing of the sort.”
Bridgewater is demanding that the pair no longer refer to themselves as “key figures” at Bridgewater, and that they pay damages to the $160 billion hedge fund.
Bridgewater claims in their complaint that neither employee was ever promoted above their entry-level jobs and nor “was ever asked or permitted to in any way manage or oversee any Bridgewater fund.”
The complaint states that Wang never made “any investment decisions for Bridgewater.”
Wang denies he misrepresented his role at the huge hedge fund firm:
“Bridgewater in general has a pretty long history of going after its employees, we didn’t think they would go after us in this case but apparently they are,” Wang said.
Hedge fund manager Paulson & Company believes now is a good time for Allergan to bid on its fellow pharmaceutical company Shire, both companies that Paulson has stakes in. A representative of Paulson contacted Allergan Chief Executive David Pyott last week to make the push to buy. Paulson has a 2 percent stake in Allergan and a 4.5 percent interest in Shire.
The impetus for the shopping spree was the collapse of the deal which AbbVie had to purchase Shire. The merging of the two giant drug companies was severed after the Treasury Department amended the rules of tax inversions, making the deal look considerably less sweet to AbbVie, which consequently backed out. News of the merger’s demise sent Shire’s stock south, causing Paulson to absorb some pretty painful paper losses. Solution: find another buyer for Shire, for instance Paulson’s own Allergan.
As luck would have it, Allergan, in an attempt to discourage a hostile bid for them by Valeant Pharmaceuticals and the hedge fund Pershing Square Capital Management, would like to make a purchase of its own. Allergan has thought about an all-cash buy of Salix Pharmaceuticals, but those negotiations broke down. They have also considered having another drug company, Actavis, purchase them at a better price than what Valeant and Pershing offered.
Despite the fact that Allergan thought about bidding on Shire earlier this year, any interest seems to have died down. The most likely deal in Allergan’s future is the one with Actavis, say people in the know.
After more than one year on the market an historic oceanfront property owned by Hedge fund manager Scott Bommer, has at last been sold. Bommer is a well-known house-flipper in the Hamptons. The home, located at 436 Gin Lane, is also called Halcyon Lodge.
Originally offered for sale in September 2013 for $25 million, the Southhampton estate sold this week for a piddling $16 million, quite a bit less than the $18.3 million Bommer paid. Bummer.
Over the past year the property, which sits on 1.5 acres with 142 of oceanfront had its price lowered numerous times. The house has eight bedrooms, six baths, a heated outdoor dunetop pool and a three bedroom cottage for guests.
In 1946 the Fords commissioned the famous architect Phillip Johnson of “The Glass House” fame to add a one story glass wing to the estate.
In a recent articles in Forbes, Barrett Wissman, businessman, entrepreneur, philanthropist and Chairman of IMG Artists, wrote about attending “La Traviata” at the Los Angeles Opera.
As he wrote for Forbes,
“I had never imagined Verdi’s masterpiece set in 1920s Paris, but Marta Domingo’s production is beautifully atmospheric. The wonderful cast of Placido Domingo singing the baritone role of Germont, Nino Machaidze as Violetta and Arturo Chacon-Cruz as Alfredo were conducted under the able direction of James Conlon.”
Barrett Wissman, based in Los Angeles, certainly has an opinion that carries weight about such matters. As the Chairman of IMG Artists, he has offices in the US, Europe, the Middle East and Asia. IMG Artists manages artists, manages and owns branded arts and lifestyle festivals and events and has a project consulting business around the world.
As Eluxe Magazine described Wissman,
The Forbes columnist, financier and Co-Chairman of IMG Artists (one of the largest performing arts management groups in the world) has been key in organising unique festivals such as the Festival Del Sole, the Abu Dhabi Festival, the Placido Dominigo Festival and Tribeca Firenze, all of which not only offer a stellar lineup of performing artists and entertainment, but give guests the opportunity to enjoy exquisite food, wine and historical exhibitions in a culturally rich environment.
One of his most recent activities was to produce the world record attempt for the largest fireworks display even shown. Created in Dubai on New Year’s Eve, IMG Artists with Barrett Wissman used over 450,000 fireworks that were launched from 400 different locations over a geographical area of more than 60 miles. They managed to set the world record, six times larger than the last record, and to set their mark on the Dubai skyline.
It’s been a difficult few years for Radio Shack, the used-to-be popular mid-level electronics retailer. To give the company the boost it needs to get things bubbling again, some hedge funds have stepped up to the plate.
Standard General LP, a New York-based hedge fund and Radio Shack shareholder, along with some other investors, are replacing GE Capital as lead lender under Radio Shack’s senior secured credit facility.
Among the other investors is Litespeed Management LLC, also a NY hedge fund. Together these investors will be pouring about $120 million into Radio Shack for a much-needed infusion of liquidity. It is expected that the investment will be converted into equity in the next few months. Debt will be restructured in conjunction with the infusion of money.
“We recognize that we will need to address constraints under our existing term loan in order to undertake a store base consolidation program and pursue other measures to reduce our cost structure,” RadioShack CEO Joseph Magnacca said. “This amended (credit) provides time to pursue a longer-term restructuring.”
A provider of comprehensive data and research on private equity, real estate, infrastructure funds, hedge funds and other alternative investments, Preqin recently released an infographic illustrating how the hedge fund industry has changed since the financial crisis of 2008.
Since the crisis there has been an increase in the number of hedge funds that have launched. This is despite increased regulation of the industry. In the last six years there has also been a rise in the amount of assets under management in the industry.
Take a look for yourself at this informative infograph.
Speaking on a panel during the Bloomberg Markets Most Influential Summit held last Monday, Julian Robertson, founder of Tiger Management, forewarned his audience that bubbles in the financial markets are about to burst.
Robertson, one of the hedge fund industry’s most successful managers explained that despite a recovering economy, one of the driving forces behind the recovery are smaller bubbles in the financial markets which are eventually going to “bite us.”
“The bubble will burst in a very bad way,” said Robertson.
During the panel discussion Robertson said he is most worried about the bond market. In order to give their economies a nudge governments have been buying bonds, which have caused interest rates to fall. Robertson explained that due to the low interest rates many investors have been forced into the stock market, and the large numbers of people investing in securities is creating a bubble.
Robertson pointed out that bubbles always burst. The reason bubbles form in the first place is because it is hard for investors to see why prices should ever go down. “The drop in 1987 come out to the blue,” Robertson said.