Castle Harlan Press Release: Launch of Titan Production Equipment

July 19, 2018 James Heinsman Company Spotlight

Exterran sells production equipment business, creating new local company

Titan Production Equipment has launched in The Woodlands, the company announced in a July 11 press release.

The company was created through the sale of Houston-based Exterran Corp.’s (NYSE: EXTN) North American production equipment manufacturing assets to an affiliate of New York-based private equity firm Castle Harlan Inc. The deal was announced in April but financial terms were not disclosed.

In an April press release, Exterran said the sale would help the company accelerate growth “by focusing as a systems and process company for oil, gas, water and power.” Exterran will continue manufacturing production equipment outside of North America and will offer production equipment in North America through Titan, Exterran’s preferred supplier for the region, per the April release.

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Credit Suisse Cut More Jobs as Part of Three-Year Plan

July 17, 2018 James Heinsman Company Spotlight

The New York hedge fund division of Credit Suisse has been re-organizing. In late June-early July, seven positions were trimmed at the company’s key brokerage unit. Included in the cuts were senior bankers Tony Bertoldo and Justin Carey. Others asked to leave were Philippe Hatstadt and Ralane Bonn. Not all are fired; some will be moved to other positions in the company.

Credit Suisse is Switzerland’s second-biggest lender. It is now in the last stages of a restructuring that has been going on for three years. The company has been improving its wealth-management division and limiting capital allocation to only trading-related transactions.

The late June shake-up came on the heels of previous walks which included Indrajit Bardhan, who was the global head of prime brokerage. Along with Bardhan, Michael Wingertzahn and Gardy Berthoumieux were dismissed. Paul Galietto replaced Bardhan.
Credit Suisse has been subject to the same pressure from stricter capital requirements as other investment banks around the world. In addition, the absence of volatility negatively effects revenue. Still, Suisse’s Global Markets section adds 26 percent to the group’s revenue.

The overhaul resulted in thousands of job cuts in New York and London, but other areas of the bank are expected to grow, including leveraged finance, some parts of equities trading, and a special unit named Advanced Execution services, with Anthony Abenante in charge.

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Human Nature Dictates How We Invest, Not Logic: New Study Shows

July 7, 2018 James Heinsman In the News

Despite the mounting empirical evidence that passively investing in exchange-traded funds and other index type funds, money continues to flow into managed hedge funds with active fund managers.

A research paper published in June concludes that the idea of realizing higher returns by doing less seems too good to be true to investors, and they therefore continue to give their money into the hands of stock-pickers, even if their fees and performance sucks out the value for their customers.

Authors of the report, J.B. Heaton- soon to be the law and business fellow at the University of Chicago Law School; and Ginger Pennington- an assistant professor at Northwestern University’s Department of Psychology, explain that people are simply pre-programmed to believe the well-advanced myth about active investing.

“Despite clear evidence, it may simply be too difficult for a substantial number of investors to believe that superior returns are available by doing nothing but investing in an index fund rather than investing with active managers,” the paper says.

Yes, EFTs are the recipients of a surge in capital, as they should be, but hedge funds have been outdoing themselves lately. New money has been added to the hedge fund industry for four quarters in a row. The niche saw $1.1 billion of net influx during the first three months of 2018. In addition, new funds popped up on the scene more often than old ones closed for three consecutive quarters.

In a different study done by the British Psychological Society in 2003, 107 traders in London from four investment banks were tested. They were told to make the line on a graph go up as much as possible and were told that by pressing certain keys on the keyboard every one-half second might affect how the line grows.

In truth, the line on the chart developed randomly. But when the subjects were asked how much influence they thought they had on the line by pressing the keys, the traders who had earned the lowest bonuses and had the lowest profits for their firms were the very ones most convinced that their interventions had some effect.

Heaton and Pennington conclude that the marketing strategies for the asset management industry should be forced to add warnings, like those of cigarette ads. They suggest something like:

“Many active investment strategies under-perform more inexpensive alternatives. Ask your broker for more information.”

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Activist investor Jana Hired Staff for New Socially Responsible Fund

July 4, 2018 James Heinsman Company Spotlight

Jana Partners LLC, the activist investment firm now taking steps into socially responsible investing, has hired a portfolio manager and analyst to help oversee its effort of pushing companies to become better corporate citizens.

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Torbillon Brings on Ross Berman as President

June 25, 2018 James Heinsman Company Spotlight

The headline-making hedge fund, Tourbillon Capital Partners, is hired a former hedge fund manager, Ross Berman, to be its president and chief strategy officer.

Lately known for its awesome negative returns, Tourbillon is run by Jason Karp, previously employed by Carlson Capital and SAC Capital, Steven A. Cohen’s fund manager. Karp launched Tourbillon in 2012.

For the past three years Berman has been consulting in the hedge fund industry. He also ran his own hedge funds twice. He helped to co-found BAM Capital Management, in business from 2002-2010. He ran Green Owl Capital from 2012 to 2016. Berman is replacing Amy Zipper as president and COO, a job she has held since 2012, at the company’s founding.

In its early days Tourbillon was making profits in the double digits, but has since fallen on harder times, along with many hedge funds recently. Two consecutive years of losses motivated some of the firm’s clients to pull their money. Today the fund is managing about $2 billion, down from $3.4 billion at the end of February. The fund lost 14 percent in 2017 and 9 percent in 2016. In 2013 the firm had a spectacular 21 percent growth rate, its best ever returns. So far in 2018 it lost 1.4 percent until May.

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Hedge Fund Billionaire Wants to Redefine Capitalism

June 17, 2018 James Heinsman Hedge Fund News

Paul Tudor Jones, billionaire hedge fund manager, says the 50-year-old definition of capitalism coined by Milton Friedman is outdated in today’s world of the mega-rich.

According to Friedman the “social responsibility of a company is to improve its profits.”
But Jones says that this definition needs updating.

“When Milton Friedman said that, tax rates had just come from 91 percent to 70 and income inequality was one-fifth of what it is today,” he said. “You can see how it was relevant at the time but fast forward to where we are today. It’s a different deal.”

Speaking on CNBC’s “Squawk Box,” in a rare interview, Jones said, “Capitalism may need modernizing. In 1985, 35 percent of nation’s wealth was owned by the bottom 90 percent. Today, they own 23 percent, and that 12 percent has gone to the top.”

Jones is the founder of the Robin Hood Foundation, a group that is working to end poverty in New York City.

One example of this re-thinking of capitalism is the upcoming launch of a new exchange-traded fund which focuses on social impact. The launch of the fund by Goldman Sachs uses a model from Jones’ own foundation, Just Capital. The model ranks businesses on parameters like employee conditions, environment and products. Just capital watches a selection of Russell 1000 companies, including Apple, Amazon and Bank of America.

Jones believes that the new ETF might one day challenge the benchmark US stock index.

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Hedge Funds Making a Comeback

June 11, 2018 James Heinsman Company Spotlight

Photo courtesy of Alpha Stock Images,

As Mark Twain once so famously quipped after seeing his own obituary in a newspaper, “Reports of my demise are greatly exaggerated,” so too the reports of the end of hedge funds appear to be exaggerated. Quite the contrary, by the end of last year, and continuing into this year, hedge funds are on a definite rebound.

The industry is experiencing good news on two fronts: cash flowing into the numerous funds, as well as noticeably improved returns for investors. According to hedge fund researcher HFR, as of October 2017 the average hedge fund advanced 5.4% while $39 billion of new money entered the arena. The increase is the best its been since 2010, while in 2016 $112 billion exited the hedge fund sector. That turn around is giving many investors and managers something to smile about.

One example of a hedge fund riding this wave of good news is Brahman Capital Corp, a New York based firm that went mostly unnoticed for over thirty years. Two years ago, Brahman Capital reached its high point of over $5 billion in assets under management. Betting on a popular stock at the time, Valeant Pharmaceuticals, the fund traveled the storm down along with Valeant, which crashed from a high of $257 per share to $14 a share. This set-back forced Brahman to report losses to their clients, and some withdrew their money.

Brahman picked itself up, unloaded its shares of Valeant and, with its remaining $38 billion AUM, pulled itself up to bigger and better rewards. During 2017, the fund experienced a gain of 17% and expects the good news to continue while it rides the wave of better times along with the industry as a whole.

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Top 25 Fund Managers Earned $15.38 Billion Collectively in 2017

June 4, 2018 James Heinsman In the News

Hedge funds seem to be rebounding from their years-long slump, with 2017 being spectacularly lucrative for the extremely lucky few.

Four hedge fund managers realized personal annual earnings topping the one-billion-dollar mark, an astronomically good years wages by anyone’s standards. Those four include James Simons of Renaissance Technologies with a sweet $1.7 billion; David Tepper of Appaloosa Management, who made $1.5 billion in 2017; Kenneth Griffin of Citadel made $1.4 billion; and Bridgewater Associates’ head Raymond Dalio banked $1.3 billion.

As a group, the top 25 hedge fund managers together brought home a cool $15.38 billion, more than the GDP of many independent countries, such as Bahamas, Nicaragua, Armenia, and many others. The average income of these 25 high-wealth individuals comes to $615 million per manager. That is a pay raise of 40% over 2016.

It is not just the managers that are doing great; the hedge funds are also doing better. The managers are bringing in better returns this year than in 2016, when about half of all funds lost money or only earned single-digit returns.

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Hedge Fund Short Selling Favorites

May 28, 2018 James Heinsman Hedge Fund News

Creative Commons 3 – CC BY-SA 3.0 Courtesy of Alpha Stock Images, Photo by Nick Youngson.

Betting that a company’s stock will lose value is called short selling, and hedge fund managers use this strategy as one more way to make their money work hard for them.

We usually look at the most popular investments hedge funds are making– its almost always bets on the belief that the company’s stock price will rise. After all, the great truth of investing in the stock market is its historical, inevitable rise in value over the long term. Betting on downturns is riskier, since it goes against a company’s objectives, and it is a short-term assessment rather than the recommended value investing where your money is in the market for the long haul.

Money managers look for companies that they think are overvalued and bet that the price of the company’s stock will drop. This is a list of companies that Goldman Sachs evaluated as the ones hedge funds have been short selling the most. The list is part of the investment bank’s latest “Hedge Fund Trend Monitor.”

• AT & T: This telecommunications giant has a total short interest of $6.3 billion.

• Intel: This giant in the computer industry makes semiconductors and is the second biggest shorted company with about $3.9 billion bet against the company.

• Walmart: One of retails largest companies, there are $3.5 billion worth of short bets against this hugely successful company.

• Nvidia: This company makes graphics processors and semiconductors. Not long ago it was seen as a company going up. Now investors consider it one of the most overvalued stocks, betting against its rise with $3.3 billion in funds.

• CVS Health and Walt Disney: Both companies have $3.1 billion in bets against them, tying for fifth place.

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NFL’s Panthers a Great Bet for Investor Tepper

May 21, 2018 James Heinsman In the News

David Tepper, billionaire hedge fund manager, is after the NFL’s Carolina Panthers for

Image of David Tepper of Appaloosa Management. Photo courtesy of Wikipedia and Appaloosa Management.

about $2.2 billion about double what Forbes says it was worth in 2007, about $957 million. Observers see his move as one with long-term promise. The deal is still not approved, the NFL has to sign-off before it is official, but if it does pass muster, it will be the largest amount ever paid for a football franchise. The previous record was set in 2014 when the Pegula family purchased the Buffalo bills for what was then an astounding $1.4 billion.

Forking over more than $2 billion seems outlandish, but analysts agree that the team should pay Tepper back, and then some. In just two years the Pegulas saw the price of the Bills climb to $1.6 billion in only two years, bringing in $200 million more than their original investment. But Tepper is likely looking at the industry and sees where it is heading: up.

As the way people enjoy sports, and especially football, evolves, more avenues for making money are presenting themselves. Football fans can now watch games online using several venues: Amazon, Facebook, Twitter and YouTube are all skirmishing for rights to broadcast games.

Also fueling the value climb will be the recent US Supreme Court decision to allow states to legalize sports gambling. One investor, Mark Cuban, said the decision was wonderful news for sports investors and the gaming industry.

“I think everyone who owns a top four professional sports team just basically saw the value of their team double,” the owner of the NBA’s Dallas Mavericks said in a “Squawk Alley” interview. “It can finally become fun to go to a baseball game again.”

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