Paulson Hedge Fund Circling the Wagons

March 18, 2018 James Heinsman Hedge Fund News

The vast empire of funds under management by John Paulson’s management firm is continuing to dwindle in size with layoffs and redemptions.

Paulson’s company, once one of the largest in the sector, announced it will be returning money to investors in some of the firm’s funds including the Credit Opportunities fund. People with money in that particular fund will be able to transfer their capital to a separate holding area, or else they will have to redeem their funds. Several employees were let go as the firm cuts expenses.

About ten years ago Paulson leaped into financial stardom with a successful bet against the US housing market. That was ten years ago, today Paulson is going through a crisis which has cut his firm’s aum from a top $38 billion in 2011 to just about $9 billion today. And most of that money is Paulson’s own.

With about 90% of the money in the firm Paulson’s the question is whether he will close his firm to outside investors entirely. There are no plans underway at the moment to turn the firm into a family office, but the firm is switching its focus on to distressed debt and merger arbitrage strategies.

The loss of capital means there is less money to pay employees, and thus the flurry of lay-offs. In 2016 there were 128 employees, but today there are only 95.

“We are rightsizing the firm to focus on our core expertise in areas that are growing,” said a statement from Paulson’s office about the layoffs.

The headquarters is also being moved to the offices of Steinway Musical Instruments. Paulson bought the piano manufacturer in 2013.


John Paulson, layoffs, Steinway,

Citadel’s Aptigon Lays Off 34% of Staff

March 12, 2018 James Heinsman Hedge Fund News

One of the world’s largest hedge funds, Citadel, has shrunk the size of its stock-picking division, Aptigon.

The company fired 49 people between the end of February and early March from its two-year old unit, a loss of 34% of staff. Among the people who lost their jobs were portfolio managers, analysts, associates and others.

The downsizing is one of the largest in recent days. About half of those let go found employment elsewhere in the firm. Citadel employs about 1900 people in its hedge fund business, is headquartered in Chicago, and manages about $27 billion.

“We changed the leadership of Aptigon Capital because the prior leadership had failed to demonstrate it could generate the performance we expect from a Citadel business. We are committed to the success of Aptigon and will continue to recruit leading talent to the team,” a spokesman for Citadel explained.


Aptigon, Citadel,

Einhorn’s Greenlight Hits Red Light in February

March 4, 2018 James Heinsman Hedge Fund News

Performing more poorly than the S&P 500 Index loss of 3.7 percent in February, David Einhorn’s main fund, Greenlight Capital, lost 6.2 percent during the same period for a total downturn of 12.3 percent for 2018.

Einhorn explained that his hedge fund was going through its worst performance in its history after losing 6.6 percent in January. Ever the optimist, Einhorn said that the situation was similar to what happened in March 2000. During that month the stock market grew by 10 percent, while Greenlight just sat, unmoving. But the next month Einhorn’s contrarian strategy began to reap benefits for his investors, while the rest of the market went through the tech bubble bust.

“While the environment has remained difficult with growth stocks accelerating their outperformance against value stocks this year including February, we think a reversion may finally be coming soon,” he told stakeholders in Greenlight Capital Re Ltd., a reinsurer that depends on Einhorn for investments.

Four out of five of Einhorn’s bets as of December 31st, 2017 have headed in the wrong direction. Two long bets, Brighthouse Financial and General Motors fell, 7.5 and 4 percent respectively. His short bets, on Amazon and Netflix are up, unfortunately for Greenlight, returning 29 and almost 52 percent.


Amazon, Brighthouse Financial, David Einhorn, General Motors, Greenlight Capital,

Apple Snubbed by Hedge Funds

February 26, 2018 James Heinsman Hedge Fund News

Apple’s headquarters at Infinite Loop in Cupertino, California, USA. Courtesy of the author, Joe Ravi, using license CC-BY-SA 3.0.

According to an assessment of hedge fund holdings compiled by Goldman Sachs, Apple Inc, is the only “big five” tech company that is not also a “top five” stock holding among hedge fund investors.

The five most-owned companies by hedge funds are Time-Warner, Amazon, Facebook, Alphabet and Microsoft. The publication lists the 50 stocks that appear most often among the top ten holdings of basic hedge funds.

Apple turns out to be the eleventh most popular holding on the list as a top ten holding in 34 funds. Amazon is a top-ten holding in 80 funds, Facebook is a top ten in 70 funds, Alphabet in 54 funds, and Microsoft in 52 funds. However, this list of so-called VIP stocks does not consider the S&P 500, where Apples huge market capitalization towers over other companies.

Several other tech companies made it to the list for the first time, including supplier for Apple, Qualcomm, JD, Booking Holdings, and Activision Blizzard. The tech sector is the most popular on the GS list, with 24%, despite the fact that funds have been selling off their tech positions in favor of biotech and pharma stocks.


Activision Blizzard, Alphabet, Amazon, Apple Inc., Facebook,

Hedge Funds Lower Fees to Lure Investors

February 19, 2018 James Heinsman Hedge Fund News

Since the financial downturn of 2007-2008 hedge funds have been under increasing pressure to keep their clients. In 2016 disgruntled investors pulled $70 billion out of hedge funds in response to poor past performance exacerbated by immodest fees.

The average management fee paid for a hedge fund investment fell to 1.56 percent in 2017 and the average performance fee shrunk to 17.3 percent. The trend of falling fees sped up in 2014, dropping an average of .13 percent for management and .78 percent for performance.

Before the crisis the fee structure for hedge funds was almost universally the famed “two and 20,” standing for 2 percent management charge and a whopping 20 percent for performance. Although many hedge funds are lowering that formula, there are still others holding on.

Lowering fees seems to be having an affect on winning back investors. In 2017 hedge funds acquired $9.8 billion in new money, helping to bring industry wide managed assets to a record high of $3.2 trillion by the end of the year.

Multi-strategy hedge funds are still more expensive that other strategies which are less work intensive, while customized fees structures are also a possibility at some firms. In some cases managers will agree to lower fees if assets grow, or if they agree to keep their money invested for a longer time frame.



History in the Making: Donald Sussman & David Shaw

February 19, 2018 James Heinsman Company Spotlight

It’s always fascinating to get a peek into the early days of the hedge fund industry and of the people who have helped to shape it. Certainly, Donald Sussman and David Shaw are shapers of the industry and the story of where their two worlds collided is one worth retelling.

In a recent article in NY Magazine, that’s exactly what was done. In the summer of 1988, David Shaw asked Donald Sussman if he might come to see him for some advice. Asking advice of the Paloma Partners founder, Shaw wanted to know whether or not to take an offer from Goldman Sachs. Donald Sussman had an incredible talent for recognizing talent. Shaw explained to Sussman that “I think I can use technology to trade securities.”

Donald Sussman, reading Shaw and his talent said, “If you’re confident this idea is going to work, you should come work for me.” Paloma Partners ended up investing $30 million with D.E. Shaw, and his certainly never regretted it. D.E. Shaw has grown into a company with an estimated $47 billion and Shaw is worth an estimated $5.5 billion.

Interestingly, in the early days, Sussman would visit Shaw’s office weekly. As Sussman recounted,

“Once they started trading, they started making money out of the box. These were very serious folks. I used to go and sit next to them watching them trade. They didn’t miss a goddamn thing. The atmosphere of the place was unlike any other investment firm. It was like going into the research room in the Library of Congress.”

Now, as D.E. Shaw gets ready to celebrate its 30th anniversary, Sussman will be celebrating along with him. Donald Sussman’s firm invested hundreds of millions of dollars with D.E. Shaw;  Sussman can say with certainty, “I never doubted him for a minute. I never envisioned that D.E. Shaw would be $47 billion, but I did envision how David would change the world of finance.”

The rest, as they say, is history.


D.E. Shaw, David Shaw, Donald Sussman, hedgefunds, Paloma Partners,

New Appointments at George G. Hicks’ Värde Partners, Inc.

February 15, 2018 James Heinsman Hedge Fund News

Värde Partners, Inc., is a $13 billion global alternative investment firm which George G. Hicks co-founded in 1993.   As well as being a co-founder of the firm, Hicks also today holds the roles of: CEO co-CIO and Partner.

In recent news, the company at which George G. Hicks is at the helm, announced a new partnership between Värde Partners, Inc. and SS&C Technologies Holdings Inc., the latter of which is an international provider of fiscal services software as well as software enabled services.  SS&C Technologies is now offering services to its new client – Värde Partners – in the areas of operational administration, fund administration and other such technology applications for their new client’s various strategies and funds.

George G. Hicks brings a wide variety of expertise and experience to his current roles at the firm.  This gives him the ability to focus on Värde Partners’ capital equipment investment strategies, corporate securities and small balance loans.  He brings to the firm a background in the legal industry, most notably when he worked toward the facilitation of various restructuring matters.  Hicks also worked at Cargill Financial Services Corporation in the role of Senior Vice President and Manager, whereby he supervised international merchant banking matters. Vis-à-vis his official legal career, Hicks held the role of Senior Attorney and counsel at Cargill, in their legal department.

Värde Partners’ COO and MD, Brendan Albee, explained the company’s decision in selecting SS&C Technologies Holdings Inc.:

“Värde is committed to leveraging technology to digitize processes, support controls, and empower our organization with data. We are also keenly focused on partnering with service providers who can complement our efforts to meet the needs of our investors. We selected SS&C GlobeOp as our partner because of their unique combination of customized services and integrated technology solutions.”



George G. Hicks, Värde Partners,

Rod Gancas Sponsors Princess Grace Foundation

February 8, 2018 James Heinsman Company Spotlight

Rod Gancas is one of the Crown Sponsors of the annual 2017 Princess Grace Awards gala.  The awards given there come from the Princess Grace Foundation in an effort to “identify and assist emerging talent in theater, dance, and film by awarding grants in the form of scholarships, apprenticeships, and fellowships.” The Princess Grace Foundation was established three-and-a-half decades ago and is in part, a way of preserving the legacy of Princess Grace (Kelly) of Monaco Monaco.

According to the foundation’s Executive Director, Toby E. Boshak:

“This marks the most joyous time of year for the Foundation as we welcome the next group talented and emerging artists into the Princess Grace Awards family.  Each year, we are captivated by a new generation of exceptional Award winners whose work will influence the artistic landscape.  It’s a privilege to be a part of their artistic growth in the same way we have watched this year’s Statue Award winners, Bridget Carpenter and Dormeshia Sumbry-Edwards, evolve.  We are incredibly proud of all of them.”

Thanks to this year’s Crown Sponsorship of the Annenberg Foundation, Karen and Rod Gancas and other generous contributors, the event was held, on October 25, 2017.  The Gancas’ in attendance at the 9th annual event at the Beverly Hilton Hotel, where over $1million was awarded to the 2017 winners. The prize-winning categories are: theater and playwriting; dance performance and choreography; and film.

Rod Gancas is the founder and CIO of Field Street Capital Management.


Field Street Capital Management, Rod Gancas,

Asian Startups Worth Watching

January 29, 2018 James Heinsman In the News

Asia is certainly a place to keep your eyes open for emerging hedge funds. Last year, as Asia-focused funds were some of the top performers, global investors are showing more of an interest in the area. In 2017, an estimated 37 Asia-focused hedge funds started. Interestingly however, the average new fund last year started with $21.9 million, as compared to $89.4 million in 2004.

Many of the recent and future Asian startups are listed here and include Keyrock Capital Management, Toona Tree Capital, Yunqi Path Capital, Trikon Asset Management, Ishana Capital, APTA Investments, Ovata Capital Management, Inventio Capital Management, Navik Capital and others.


T. Boone Pickens Shuttering Energy Fund

January 18, 2018 James Heinsman Hedge Fund News

Legendary oil investor T. Boone Pickens is shutting down his energy hedge fund, BP Capital. The reasons are two-fold, poor health and poor fund performance.

“It’s no secret the past year has not been good to me, from a health perspective or a financial one,” Pickens said in a confidential letter. “Health-wise, I’m still recovering from a series of strokes I suffered late last year, and a major fall over the summer. If you are lucky enough to make it to 89 years of age like I have, those things tend to put life in perspective.”

He added that the fund will now move towards a more family office structure. Employees of the fund will be leaving the company, setting out on their own.

Pickens became famous as the leader of Mesa Petroleum during the 1980s when corporate takeovers were popular. He retired at the age of 69, launched BP Capital as an energy investment firm, and promptly made his first billion dollars.

“I’ve thrived and profited on the volatility in the energy space. But for me, personally, trading oil is not as intriguing to me as it once was,” Pickens explained.

Closing BP Capital does not mean Pickens is throwing in the towel, or slowing down. He stated that he is going to work hard on recovering his health and investing in philanthropy and political causes he believes in. He will also continue to add his viewpoint to the ongoing energy discussion.

“As this chapter closes, I couldn’t be more excited at what lies ahead,” Pickens said in the letter.


BP Capital, energy market, T Boone Pickens,

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