Oda of Point72 Launching His Own Fund

December 10, 2017 James Heinsman Hedge Fund News

Tomofumi Oda, who was a portfolio manager at Steven Cohen’s Point72 Asset Management, will be heading out on his own at the end of this year. He will take the fund he started a year ago with him, Blue Swell Asset Management, which will continue to bet on the behavior of Japanese securities.

Oda ran Japan equity strategy for the $11 billion family firm for the past 6 years, based in Singapore.

“Our firm has a history of training and developing some of the industry’s greatest investors,” stated a memo signed by Cohen and President Doug Haynes. Oda joins “a cohort of highly successful PMs who have graduated from the firm and launched their own funds.”

Previously known as SAC Capital Advisors, Point72 has spawned several successful funds from former traders who were nurtured by Cohen. Two of the new firms include Melvin Capital started by Gabriel Plotkin, and David Rosen of Rubric Capital Management.

Hedge funds which have been betting on the Japan stock market have so far seen a 12% rise in value through the end of November. If the stocks continue on the same trajectory these funds should perform their best since 2013, according to data from Eurekahedge Pte.

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Blue Swell Asset Management, Point72, SAC Advisors, Steven Cohen, Tomofumi Oda,

Is Bitcoin in a Bubble? Experts Say Yes

December 4, 2017 James Heinsman In the News

As the value of one bitcoin explodes past $11,000, some in the hedge fund community are bad-mouthing the rise of the mysterious cryptocurrency.

Ken Griffin, founder and CEO of the Citadel hedge fund, compares the recent blast-off of bitcoin to the infamous tulip bulb bubble in 17th century Holland, also known as “tulipmania.” Griffin believes that the reason for bitcoin’s sudden rise is the likelihood that people are confusing the currency with the technology that supports it, called blockchain.

He explained that the financial industry has been investing in blockchain technology, believing that its future will have profound social implications on finance. Blockchain creates fast, safe and permanent transaction records without the need for third parties like banks getting involved. Griffin added that large corporations and financial institutions are experimenting now with blockchain technology to hopefully improve global payments and the management of supply chains.

Bitcoin is different than blockchain, and Griffin thinks people don’t realize that difference. He is worried that people who are now rushing to buy bitcoin don’t know what they are doing, anxious to get on board the fast-moving train to prosperity.

Griffin did not say bitcoin is a fraud, as some other pundits have ventured, but he does insist it is a bubble that is sure to burst, hurting many people along the way.

Others joining Griffin in the bubble chorus are Jim Cramer, former hedge fund manager, writer, and host of Mad Money, and Nouriel Roubini, and professor of economics at the Stern School of Business at NYU, who said last month that bitcoin was a “gigantic speculative bubble.”

Chief Investment Officer at Japan Post Bank, Katsunori Sago, also said the price of bitcoin is a bubble, claiming that the real price for one bitcoin should be closer to $100. Severin Cabannes, Deputy CEO of Societe Generale, and TidjaneThiam, CEO of Credit Suisse, are of a like mind with Griffin. Warren Buffet, the iconic investor, is quoted as saying that bitcoin’s price gains this year is a real bubble.

There is at least one expert that says bitcoin is nothing but a fraud; JP Morgan Chase CEO Jamie Dimon. James Gorman, CEO and chairman of Morgan Stanley is quoted as saying that bitcoin “doesn’t deserve the attention it is getting.”

Yet, there are respected investors who are investing in bitcoin and also starting cryptocurrency funds. The largest exchange for derivatives, CME is planning to introduce bitcoin futures this month.

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New Fund Launching with Backing from Soros’ Sons

November 26, 2017 James Heinsman Hedge Fund News

A former money manager from the George Soros family office, Santiago Jariton, is making plans to start a hedge fund primarily focused on stocks in Latin America. The main backing for the launch will be coming from two of Soros’ five children, Jonathan and Robert.

Jariton, who is 37, started with Soros in 2005, and in 2014 became the head of Latin America equity investments at Soros Fund Management, until this past May. The plan is for the new fund to open in February 2018 with a maximum of $250 million AUM with a large junk from the Soros brothers. The new fund will be called Emerging Variant.

The fund will open offices in New York, Buenos Aires and Sao Paulo, trading securities from Argentina, Brazil and Mexico.

Emerging market investments have been trending recently, with investments topping out at a record $223 billion during the third quarter of 2017. That represents a growth of 11 percent from last year. Of the 1,145 hedge funds that invest in emerging markets, only 10 percent are invested in Latin American stocks. Latin America is leading in growth among the emerging market strategies, with 10 percent growth in Q3.

Last June Gerorge Soros’ eldest son Robert left his position as chairman and president of Soros Fund Management, so he could spend more time managing his own money at the Soros family office. Five years ago, Jonathan established his own, connected family office, JS Capital.

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Emerging Markets hedge funds, George Soros, Latin America, Santiago Jariton, Soros Fund Management,

Hedge Funds Can’t Complain This Year

November 18, 2017 James Heinsman Hedge Fund News

As the stock-market continues its upward march, hedge funds are reaping the benefits. Hedge Fund Research Inc. reports that hedge funds, on average, are having their best year since 2013.

Hedge funds have been in the dog house in recent years, taking a lot of slack for charging high fees despite lackluster returns. This year less people are complaining and are happy to pocket their higher earnings, despite the continued high fees.

On closer look, however, compared to equity benchmarks like the S&P 500 Index, hedge funds are still lagging behind. The S&P is up so far this year by 15.7 percent, while hedge funds’ average return barely got to 6%.

The best strategies for funds in 2017 were health care and technology. Through September the S&P Tech Index rose by 26%, and the Bloomberg Barclays US Aggregate Total Return Value Unhedged investment grade bond fund returned 3.1%.

Funds in it for the short term fared the worst, with short-bias funds losing 8% and energy and basic materials funds fell by 5%.

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Hedge Fund Research Inc, S&P 500, S&P Tech Index,

Aksia’s New Partnership: Supporting Schools

November 11, 2017 James Heinsman Hedge Fund News

In conjunction with a Brooklyn Middle School, the research and portfolio advisory firm Aksia has begun an initiative which seeks to impact students in a number of ways, including through the creation of development of interactive after-school programs. For the 2017-18 academic year, the school – MS 582 – will reap the benefit of Aksia’s involvement through an expansion of their chess program, resulting in greater student participation, and even professional coaching from ChessNYC.

The benefits of chess playing in schools are numerous and over the years Chess NYC has become known as a leader in chess education.  Chess NYC focuses on the sport and fun aspect of the game and provides opportunities for children from beginners to championships in its programs.

Other educational initiatives taken by Aksia include the company’s Lunch & Learn Series, whereby every week staff members as well as industry experts from the community are invited to take part in the current discussion.

 

 

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Bitcoin Boom Boosts Bill Miller’s Fund into the Stratosphere

November 6, 2017 James Heinsman In the News

Superstar fund manager Bill Miller loaded his MVP 1 fund with bitcoin this year, and has seen mind-bending growth of 72.5% so far this year.

Miller is known for beating the S&P 500 for 15 years straight when he worked for Legg Mason, until the 2005 recession cramped his style. In August 2016, after 35 years with Legg Mason, he jumped ship and founded his own firm, Miller Value Partners, or MVP. Last year his fund was only 5% composed of bitcoin. This year, however, after buying up the cyber-currency at an average price of $350 each, his portfolio is now made up of about 30% bitcoin. Considering that Bitcoin is now selling for $6100 each, a 1600% mark-up, the fund is doing quite well, thank you very much.

Although Miller told the Wall Street Journal that at those prices he isn’t buying anymore bitcoin, he would be willing to “put 1% of my liquid net worth in it here” if he didn’t already own a considerable pile of the digital currency.

According to Forbes Miller invested 1% of his net worth in bitcoin three years ago.

Miller’s flagship fund, MVP 1 has $154 million AUM, and has flown through the roof with a 72.5% growth spurt this year. The S&P 500 grew by 15%, and the HFRI Fund Weighted Composite Index, a measure of hedge fund performance, was up 5.9% up until the end of 3Q this year.

Not everyone is equally excited by the expansion of bitcoin. Although the number of funds with a focus on digital currencies is now at 124, nay-sayers like Howard Marks of Oaktree Capital told investors last September that bitcoin is a “speculative bubble.”

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Bannon Vows to Bust Billionaire Republican Supporter Singer

October 30, 2017 James Heinsman In the News

According to a report from Axios, Steve Bannon, the ex-White House Chief Strategist and owner of ultra-right-wing Breitbart News, told President Donald Trump he was going to go “off the chain” to destroy Paul Singer. Singer is the head of hedge fund Elliot Management, and a major donor to Republican causes and candidates.

This news follows another report that a conservative website which is backed by Singer-The Washington Free Beacon- hired a company called Fusion GPS to look for negative information on a number of Republican candidates for president, including Trump.

Fusion GPS is the group that created the Russia dossier, the infamous document that says that Trump conspired with Russian officials to influence the results of the presidential election in 2016. According to the New York Times Hillary Clinton’s campaign also paid for part of the research that is included in the dossier.

Singer was also a major contributor to the “Never Trump” movement which gasped for air and then went out during the presidential campaign. Since the story in the NYTimes appeared, Breitbart News has been producing a steady stream of attacks on Singer, calling him a “globalist,” and also attacking politicians who have taken money from Singer.

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Axios, Donald Trump, Elliot Management, Fusion GPS, Paul Singer,

Dalio Says US Economy Not So Rosy Just Under the Surface

October 24, 2017 James Heinsman Economic Barometer

Ray Dalio, founder and head of the world’s largest hedge fund, took a deep dive into the inner workings of the US economy, and did not like what he saw there.

Dalio, CEO of Bridgewater Associates, which manages $160 billion, posted on LinkedIn, the social media business networking site, his findings on the current state of the US economy, and it looks scary.

He begins by dividing the US economy into two broad categories: the 40% at the top, and the 60% at the bottom. The reason he divided up the economy this way is to more easily see that the headlines we are reading everyday are describing a robust, growing economy, the truth is something quite different. To get a more accurate view, one must see what is happening with the 60% at the bottom. The following bad news is taken straight from Dalio’s message on LinkedIn:

  • Real incomes have been flat to down slightly for the average household in the bottom 60% since 1980 (while they have been up for the top 40%).
  • Those in the top 40% now have on average 10 times as much wealth as those in the bottom 60%. That is up from six times as much in 1980.
  • Only about a third of the bottom 60% saves any of its income (in cash or financial assets).
  • Only about a third of families in the bottom 60% have retirement savings accounts—e.g., pensions, 401(k)s—which average less than $20,000.
  • For those in the bottom 60%, premature deaths are up by about 20% since 2000. The biggest contributors to that change are an increase in deaths by drugs/poisoning (up two times since 2000) and an increase in suicides (up over 50% since 2000).
  • The top 40% spend four times more on education than the bottom 60%.
  • The average household income for main income earners without a college degree is half that of the average college graduate.
  • Since 1980, divorce rates have more than doubled among middle-aged whites without college degrees, from 11% to 23%.
  • The number of prime-age white men without college degrees not in the labor force has increased from 7% to 15% since 1980.

Dalio includes a warning that the “stress between the two economies” will “intensify over the next 5 to 10 years” due to inevitable demographic and technological upheavals.

Not knowing the differences between the two economies has caused the Feds to raise interest rates, a move Dalio believes is a mistake. Taking the average of the unification of the two very different economies could “lead the Federal Reserve to judge the economy for the average man to be healthier than it really is.” He added that this could lead the Fed to implement “an inappropriate monetary policy.”

“Because the economic, social, and political consequences of an economic downturn would likely be severe, if I were running Fed policy, I would want to take this into consideration and keep an eye on the economy of the bottom 60%,” Dalio noted.

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Bridgewater Losing Another Top Exec

October 15, 2017 James Heinsman In the News

Bridgewater Associates, the world’s largest hedge fund, is saying good-bye to marketing head Parag Shah, who “recently agreed to step aside,” according to a Wall Street Journal report.

Shah has been with Bridgewater, which controls $160 billion, since 2002. He will stay on the payroll during a “period of transition.”

It is not a shock that Shah is leaving. Top leadership at Bridgewater has been in flux over the past few years, with five chief executives at the firm since early in 2016.

Bridgewater became famous on the success of its “Pure Alpha” fund, which was the most successful such fund in the history of the industry. The fund used a strategy which combined multiple uncorrelated return strategies which are leveraged to maximize returns, while simultaneously lowering risk.

Ray Dalio is the founder of Bridgewater. He published a book in September, 2017 entitled “Principles: Life and Work.”

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Tilson Closing Kase Capital Management

October 2, 2017 James Heinsman Company Spotlight

Kase Capital Management, run by well-known fund manager Whitney Tilson, is closing its doors as returns don’t meet expectations.

At its best the fund managed $180 million, a comparatively smaller fund considering the $3 trillion invested in this space. Yet the fund has been watched over the years as Tilson appeared on several TV shows and even made some highly noticed market predictions.

“It was a hard decision, but the right one,” Tilson said in an email Thursday explaining his decision to close shop.

“I expect that most of my work will continue to be in the investment field, as I still love it and am confident that I can put my energy and 18 years of experience to good use,” he said.

Tilson added that he will most likely stick to managing his own assets.
He also said that he takes no comfort from the fact that many other managers have decided to shut down their funds in recent days, finding it increasing difficult to beat the market.

This year, broadly speaking, hedge funds went up by 5.5% through August. Total funds invested in this market equal about $3.1 trillion. But investors shrank the money in hedge funds by about $70 billion last year, while money going in came to only about $1.2 billion.
In addition, the total number of funds available has been growing smaller, with exactly 9,691 now, compared to 10,142 in 2013. That is a loss of 4.4% of funds over three years.
In his letter to his clients announcing his decision, Tilson said he regretted his funds did not perform better.

“If I were managing only my own money, the fund’s recent results wouldn’t bother me quite so much. But investing and running a money management business are two very different things, and reporting sustained underperformance to you was making me miserable,” he said

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