Francisco D’Agostino of Element Capital Explains Investing Philosophy

December 16, 2014 James Heinsman Company Spotlight

In a letter by the President and Managing Director of the Element Capital Group, Francisco D’Agostino states that “The financial crisis from which we are still recovering has taught investors…that investing is risky.”

Element Capital Advisors Ltd., is an independent investment advisor with their headquarters in the British Virgin Islands with branch offices in Caracas, Venezuela and Panama City, Panama. The top priority strategy of the firm is to bring to their clients excellent returns but with minimal volatility. Element’s managers hope to achieve results that are not correlated with the behavior of major market indices. The major goal of the company is to preserve capital and liquidity.

With this background on the firm, it is not surprising that Francisco D’Agostino states in his letter that, “…we at Element are constantly navigating the changing financial landscape in order to achieve investment results that are stable, non-correlated to the volatile markets providing an appropriate foundation for individual investors.”

Element’s Multi-Strategy Fund is an excellent example of how the firm delivers on its promise. During 2012 the fund delivered 3.23 percent while maintaining a low level of volatility, below 1.29 percent.

The company is also invested in external hedge fund managers. They are completely committed to their due diligence requirements, and are at the same time as adaptive and adaptable as possible. The firm is particularly pleased with their Latin American fixed income investments for which they take pride in their expertise due to their ties to the area.

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Element Capital, Francisco D'Agostino,

Quantitative Analysts Proving Their Fund Managing Mettle

December 15, 2014 Marcus Black Hedge Fund News

Quants use computers to track markets and make investments.

Quants use computers to track markets and make investments. Photo by Raiffeisenverband Salzburg

November was a great month for computers and their handlers on Wall Street. In the past month especially, hedge funds that use computer programs to make trades demonstrated some of the best results in the industry.

One fund, Two Sigma,  which is run by an academic from the world of artificial intelligence and a mathematics maven, had a 10 percent increase in value last month in one of its strategies, with overall upward movement for the year of 47 percent. Two Sigma is a $24 billion firm founded in 2001.

A second such firm, Cantab Capital Partners, headquartered in Cambridge, had an 18 percent return in November and 32 percent for the year.  Aspect Capital, another UK-based technology-driven firm founded in 1997 with $4.8 billion AUM increased by 12 percent in November and doubled its return in 2014.

Engineers, scientists and mathematicians who are translating their specialized skills into predicting the markets are known as quantitative analysts. They design computer programs that search for price discrepancies across markets. This year, and especially in November, these technology-driven investment strategies took advantage of the crash in the price of oil and on government bonds that the human traders overlooked.

“Discretionary traders did not see value in buying and holding sovereign bonds in the U.S., U.K. and Germany,” which benefited quantitative funds, said Anthony Lawler, a money manager for GAM Holding, which invests in hedge funds. “Short energy was a large winning trade, whereas discretionary traders were by and large not in,” he said, referring to bets against the industry made by human decision-makers.

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Aspect Capital, Cantab Capital Partners, quantitative analysts, quants, Two Sigma,

Hedge Funds Preparing for Rise in Oil Prices

December 8, 2014 Maria Morales In the News

West Texas Oil plummeting in price

West Texas Oil plummeting in price

During the week which ended on December 2 speculators increased their net-long positions in West Texas Intermediate crude by 14 percent. That increase was the largest in 20 months, according to the US Commodity Futures Trading Commission.  Short bets on oil shrank by 15 percent and long bets went up by 4 percent.

The crash in the price of oil was exacerbated by the decision of the 12-country OPEC group to continue at the present level of oil output, which brought into focus more clearly the price-war in crude. Oil began its steep decline in October last year, and reached a five-year price-low last week. Adding to oil’s woes was a US boom in shale production which added to the global glut coming at the same time as a weakening in the growth of demand for oil.

“A lot of people are betting that the selloff is overdone,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund (USO) that focuses on energy. “We haven’t seen these levels in years. They represent extreme value to some folks.”

WTI was going for $66.88 per barrel on the New York Mercantile Exchange during the period covered by the CFTC report. The global benchmark, Brent crude, was $68.26 a barrel.  The price floor is now at about $60 or less, according to companies such as Deutsche Bank AG, BNP Paribas SA, and Petromatrix GmbH.

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Brent crude, Commodity Futures Trading Commission, West Texas Intermediate,

Brevan Howard Closing Commodity Fund

December 2, 2014 Debbie Jacobs Hedge Fund News

Brevan Howard, the giant fund manager with $37 billion in assets under management, will be closing its commodity hedge fund this year.

The fund, which is headed by Stephane Nicolas, has about $630 million in AUM. So far this year the fund has lost its value by about 4.3 percent, bouncing back from a 10.3 percent drop as of September. The closure of the fund was reported in the Wall Street Journal, but officials from Brevan have declined to comment on the decision.

This fund’s closure is just one more in a long line of single-strategy Brevan funds that recently shut their doors. According to Hedge Fund Research Inc. about 461 hedge funds were forced to liquidate their assets during the first half of 2014. In 2013 904 closed down, making that year the highest year for hedge fund closures since 2009.

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Brevan Howard, commodities fund, Stephane Nicolas,

Credit Suisse Hiring Nomura’s Velakacharla

November 23, 2014 James Heinsman Hedge Fund News

International Commerce Centre 201008

International Commerce Centre is the tallest building in Hong Kong and houses the offices of Credit Suisse

Credit Suisse, the second largest prime-broker in Asia with an important presence in the region’s hedge fund industry, persuaded veteran Nomura Holdings hedge-fund exec Aditi Velakacharla to jump ship and board their hedge-fund vessel.

Velakacharla will be tasked to run Credit Suisse’s Hong Kong-based group which matches its Asian hedge fund clients to possible investors. She is a popular figure in the world of Hong Kong hedge funds, formerly employed as the regional head of capital introductions at Lehman Brothers. When Lehman’s Asian division was acquired by Nomura in a takeover deal in 2008, Velakacharla went along.

Asian hedge funds have been doing well this past year. As more overseas investors look into Asia as a growth region they are taking more of an interest in the better-performing funds. By the end of the third quarter 2014 hedge funds with stakes in Asia, not including Japan, rose by 6.6 percent, compared to a 5.3 percent gain for North American hedge funds.

“2014 has been the most significant year for new hedge fund launches for a long time with many of them raising meaningful capital,” said Myo Schollum, Credit Suisse’s head of prime services coverage for Asia Pacific.

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Aditi Velakacharla, Asian Hedge Funds, Credit Suisse, Myo Schollum, Nomura Holdings,

Arbess Closing Xerion Hedge Fund

November 18, 2014 James Heinsman Hedge Fund News

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.

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Daniel Arbess, Perella Weinberg Partners, Xerion Fund,

Hedge Fund Managers’ Compensation Up 8% in 2014

November 9, 2014 Debbie Jacobs Hedge Fund News

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.

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Anthony Keizner, Blooberg’s Global Aggregate Hedge Fund Index, Glocap Search LLC, Hedge Fund Research,

Ackman Enlists Congress in His Crusade Against Herbalife

November 4, 2014 Debbie Jacobs In the News

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.

 

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Bill Ackman, Herbalife, Mercatus Center, Pershing Square Capital Management, Veronique de Rugy,

Bridgewater Suing Ex-Employees for Misrepresenting Previous Relationship

October 27, 2014 James Heinsman In the News

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.

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Bridgewater Associates, Convoy Investments, Howard Wang, Wenquan ‘Robert’ Wu,

Paulson Wants Allergan to Buy Shire

October 21, 2014 Marcus Black Hedge Fund News

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.

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AbbVie, Allergan, mergers, Paulson & Co, pharmeceuticals,

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