Hedge Crunch FinancialHayman Capital Invests in General Motors
Hayman Capital recently acquired a stake in General Motors Co, stating that the company’s stock has the potential to increase over 40% over the next year or so once the U.S. Treasury sells its stake. The hedge fund’s decision comes as the government prepares to sell and other investors move in on the GM stake.
Hayman is famous for “earning millions by betting against the overheated subprime market before the financial crisis,” Reuters explains.
Though Hayman has not released and public statements regarding the investment, founder Kyle Bass referred to the car maker as one of the best investments today.
“GM equity represents one of the most compelling risk/reward situations of any large cap in the world today. Detroit is back. And GM could lead the way forward on the equity front.”
In a recent presentation, Bass expressed his belief that the Treasury’s exit will decrease selling pressure on the stock, and likely end in a “meaningful dividend and/or buyback program” within 45 days. He also mentioned the positive outlook resulting from the continued rollout of General Motors’ redesigned full-size pickup trucks and new version of the large SUVs.
He added, “A strong case can be made that GM should trade at a premium to the group given its unique position and strong underlying fundamentals, a best-in-class leverage to global growth markets, improving operational efficiency from ongoing turnaround efforts and an improving product cadence.”
Hedge Fund Manager Turns His Talent to Vodka Production
Vodka from Honey from StilltheOne
Former hedge fund manager Ed Tiedge opened StilltheOne Distillery, where he has been producing award-winning vodka and gin products since 2010. Tiedge explains how he made the move from Wall Street to spirits after being fired from two jobs in two months:
“In Wall Street, you get two swings at bat, but you usually don’t get a third one,” Tiedge says. “I didn’t want to be a security salesman because I didn’t want to take people’s money to sell them crappy products, so I decided I was going to make something.”
After thinking about what he should make together with his wife, he decided a distillery would suit him.
“We came up with the idea of making vodka from honey,” he says, referring to himself and his wife. “I’d done some wine-making. And then I made some mead — and it didn’t taste terrible — and then I ran it through the still and it tasted really interesting,” he explained.
Vodka is unique from all other alcoholic products, in that what you make it from is immaterial. The only thing that determines if what you have is vodka is whether or not it is 190 proof. Tiedge’s wife insisted they approach the business in steps: first find a recipe for something that tastes good. Then figure out a way to make it even better.
“Picking the best honey and yeast combination took dozens of trials,” he said.
Tiedge describes what it’s like to make such a large change in lifestyle with such a change in career:
“There are weeks when my bills are due that I miss the paycheck, but I do not miss the job at all. My wife doesn’t miss that job even though there was more money in our checking account. She describes me as a much nicer person, and I’m probably the happiest I’ve been in a while. My kids seem to like me a lot more. I’m not grumpy or mad at the universe for a trade not going my way. If you make something of quality, you can feel good that you’ve made something of quality.”
Putting Their Money Where Their Hearts Are: Money Managers Making a Difference
Greg Behrman’s journey has taken him down some unusual paths. In 2007 he published a book called “The Most Noble Adventure: The Story of the Marshall Plan and The Time When America Helped to Save Europe.” Behrman was the Henry Kissinger Fellow at The Aspen Institute and a Fellow at The Carr Center for Human Rights at Harvard. He worked for two years at Goldman, Sachs & Co between college and grad school, and served as an active duty soldier in Afghanistan.
With these credentials propping him up Behrman is now launching a movement with a website which he is calling Nation Swell. The notion behind the move is to create a media business which has an activist agenda ready to solve America’s most pressing problems. He is planning on retaining the help of small communities and is backed by a small cadre of Goldman and Kohlberg Kravis Roberts managers.
Among Behrman’s supporters are Jonathan Smidt, partner at KKR; Scott Lebovitz, Goldman Sachs merchant banking partner; and head of credit at KKR Nat Zilkha. Using their own personal investments these men are supporting the cause of finding solutions to issues that affect all Americans, and beyond.
Seed money for Nation Swell is also coming from New Ground Ventures. This is a for-profit site which expects to benefit from corporate social responsibility funding looking for great ideas in which to invest. Behrman has also grabbed some outstanding media personalities to help in his efforts, such as Greg Romesh of Business Week. There are journalists from Time magazine who are going to bring together a list of projects in dire need of attention, such as homelessness and energy issues. General Stanley McChrystal was in attendance at an event to launch the new venture.
Greg Behrman’s journey has taken many extraordinary turns. Let us see where his latest path leads.
Former Eminence Execs Launching New Fund
To be called Valarc Holdings, a new hedge fund based in New York is being launched by Hari Ramanan and Adam Ryan, both former executives of Eminence Capital. The pair hope to begin trading this January with a minimum of $200 million. What is unusual about this fund is that it will require investors to “lock-up” their money for at least four years, something the vast majority of start-up funds do not demand.
Data shows that of all hedge funds begun since 2011, 72 percent were launched with no lock-up requirement whatsoever. Those funds that did require investor money to stay in the fund to some extent, only 5 percent of those demanded a four year commitment at the outset.
Ramanan was a portfolio manager at Eminence and co-managed European and emerging market investments. Ryan was a senior analyst at Eminence.
HFA Appoints Two New Directors
Thalius Hecksher, Global Managing Director of Business Development for Apex Fund Services was appointed to be Regional Director for the Hedge Fund Association’s Southeast Chapter. Robert G. Sawyer of Foley Hoag LLP was appointed to the role of Regional Director for the HFA’s Boston Chapter. These two appointments will require them to direct local HFA events and programs, and to contribute to the HFA’s mission of advancing transparency, development and trust in alternative investments.
“As the markets continue to react positively and we see continued growth within the hedge funds arena, I’m delighted to join a panel of well-regarded industry experts at the HFA who actively guide the shape of industry as we know it today through collaboration and sharing of insights in an ever changing landscape,” said Hecksher. “Florida and the Southeast is becoming a great jurisdiction of choice for new and well established managers and I’m pleased to taking on this leadership role at an important time and location.”
“I’m excited to be taking on this leadership role in an organization that represents such a dynamic segment of the financial industry,” said Sawyer. “The continued growth of alternative investments relies not only on our ability to promote broader understanding of the value of these investments, but also to promote discussion and understanding amongst our own professionals as to current issues and regulatory developments facing the industry. I’m looking forward to being part of that growth through the HFA.”
“All HFA leaders, elected and appointed, volunteer to help foster the growth of the alternative investment industry,” said HFA President Mitch Ackles. “These new U.S. regional leaders, each highly accomplished senior professional, will add to the wealth of talent and networking opportunities available to HFA members everywhere.”
Tepper Gifts Carnegie Mellon to Build New Business School Facility
David Tepper earned his MBA from Carnegie Mellon
David Tepper, founder of Appaloosa Capital Management, announced last week that he is donating $67 million to the Carnegie Mellon School of Business. The gift will be used to create the new home of the business school, the David A. Tepper Quadrangle.
“Carnegie Mellon has a long history of providing the world with innovative thinkers,” says Tepper, “and the establishment of a true hub for entrepreneurship will help create the next generation of global leaders.”
The latest contribution brings Tepper’s donations to the school, which is ranked 42 on the Forbes list of Best Colleges, to a generous $125 million. This number however represents just a small fraction of Tepper’s $7.9 billion personal worth.
With his latest donation Tepper joins a list of prominent personalities who have given back to the institutions that started them off on the road to their 10-digit fortunes. Michael Bloomberg, former New York City mayor donated $350 million to Johns Hopkins; Charles B. Johnson gave $250 million to his alma mater, Yale; and Stephen Ross, real estate developer, gifted $200 million to the University of Michigan.
Tepper grew up on Pittsburgh and attended the University of Pittsburgh, going on to get his graduate degree from Carnegie Mellon. Only a few years later Tepper launched his hedge fund, Appaloosa, based in Short Hills, New Jersey. The fund has over $18 million AUM.
Carnegie Mellon is not the only recipient of Tepper’s largesse: Teach of America and food banks in New Jersey have also benefited from the hedge fund manager’s generosity.
Blue Rice Closing Shop As Asian Funds Flounder
Adding his hedge fund to the growing number of firms closing in the Asian region, Guan Ong announced he will be returning investments to his Singapore-based Blue Rice Investment Management fund by the end of 2013. Ong, the former chief investment officer for Korea Investment Corporation, opened his fund in 2009. This most recent closing is part of the larger trend of smaller hedge funds giving up the ghost as they unsuccessfully struggle to persuade institutional investors to bring their capital to them.
Hedge fund watcher Eurekahedge stated that upwards of 263 Asian hedge funds have closed since the beginning of 2012, exactly one more than were launched during that same time period.
“The world is going to be a bit more volatile,” Mr. Ong said. “The way our funds are structured, we kind of feel that it’s better for us to return investors’ (capital) when investors are still up.”
As Economy Recovers Managers Withdraw Gold Bets
Hedge Funds are cutting their bullish bets on gold
Predicting that the Federal Reserve will be reducing stimulus activity to the economy, hedge fund managers have been lowering their bullish bets on gold. Last week managers added the highest number of short contracts in a month, and stakes in commodities fell the most since April.
During the week ending November 5th the total amount invested in gold dropped by 13 percent to 87,689 futures and options, according the data from the US Commodity Futures Trading Commission. On the other hand short bets grew by 37 percent, the highest amount since October 15. Long bets went down 4.9 percent. The total amount held by investors of 18 US-traded commodities of all types fell by 20 percent, down to 658,263 contracts. Cotton positions are the lowest for the year, and crude-oil bets are the least since June.
The price of gold slid by 24 percent so far this year, heading towards the largest value-loss since 1981, a sign that investors are losing faith in gold as a place to store value. Investors are reacting to the news that October payrolls were higher than expected, and the expansion of the economy is happening at a faster rate than predicted. The economic recovery should lead to reduced government stimulus, such as bond buying, which helped the economy in the past. Barclays Plc and Credit Suisse AG are both saying that commodity prices will most likely head south as supplies increase.
The “U.S. economy is showing ample signs that it is growing, and that means the Fed will start looking at tapering either end of this year or early next,” said Dan Heckman, a Kansas City-based national consultant for U.S. Bank Wealth Management, which oversees about $112 billion. “We are underweight on commodities as the support of stimulus will go away at a time when supplies are rising and worries about Europe are increasing.”
Meditation Key to One Manager’s Success
Ray Dalio says he has been meditating twice for 20 minutes each time, for 44 years, and it has been the secret to his success. The genius behind Bridgewater Associates, and acknowledged as one of the world’s most successful hedge fund managers, Dalio was discussing his passion at the recent NYTimes Dealbook Conference.
“It’s such a great investment … more than any other factor in my success. It opens up the two sides of the brain, brings a creativity and open-mindedness.” he says. “It allows you to clear your head and bring an equanimity to everything.”
Dalio is not alone in his practice of meditation as a stress-reducer and contributor to clear thinking. Fellow hedge fund manager Daniel Loeb, and New York Times columnist Andrew Ross Sorkin both say Dalio inspired him to take on the practice. Sorkin explained that a session of meditation the night before the Dealbook conference helped him to calm his nerves.
Hedge Fund Founder on YouTube
In an unusual move,Ray Dalio recently posted a thirty minute video on YouTube. As founder of the largest hedge fund in the world, the hedge fund guru is offering advice to the regular investor. This move appears unusual for a few reasons. First, hedge fund managers tend to be tight lipped and quiet about their industry. Second, they certain don’t use social media outlets, or the even more public forum of YouTube, to explain their tactics and their plans. But this appears to be what Dalio is doing.
As writer Zach Kouwe recently explained on his blog, “There’s no doubt Mr. Dalio wants to influence policymakers, regulators and academics. But another benefit of sharing his message on YouTube is that it humanizes him a bit and shows the world he’s a serious and transparent thinker – not just the billionaire leader of some hedge fund cult.”
Here’s the video. Viewers can decide for themselves what they think of his style: