Another hedge fund is closing shop as Aurora Investment Management announced it will return $5.4 billion in investor funds to its client base during the next several months. The decision comes after an attempt at a takeover of the firm fell apart.
Chicago-bases Aurora was to be sold to 50 South Capital Advisors by Aurora’s parent company Natixis Global Asset Management, but the deal was nixed. Roxanne Martino founded Aurora over 28 years ago, and invests in a variety of hedge funds.
“After considering a variety of strategic alternatives, we have decided that it is in the best interests of our investors to return the capital in our funds in a manner that will treat all investors fairly and equitably,” Aurora told clients in the letter dated April 22.
The hedge fund industry has been taking a beating in recent months as more investors seek to cut expenses and invest directly instead of paying high fees to managers.
“Allocations to the industry have declined and new strategies have evolved in the 28 years since Aurora was founded, which has made it more difficult to maintain the scale needed to best serve investors,” spokesman for Natixis Ted Meyer said.
The country’s largest pension fund for municipal employees, the New York City Employees’ Retirement System, is preparing to vote on Thursday to divest its investments out of hedge funds. It is expected that a majority of the pension fund’s trustees will choose move its money out of risky and high-fee-burdened hedge funds to funds which pay better risk-adjusted returns with more modest management fees.
“Hedge funds are charging exorbitant fees for high-risk and opaque investments,” said Letitia James, the city’s public advocate, and one of the trustees of the pension fund. “As financial stewards of public employees’ money, we must invest in responsible and secure assets,” she said.
Other public employee pension funds have also begun to review their stakes in hedge funds. In California and Illinois large pension funds have already divested out of hedge funds. In New York the funds which represent teachers, firefighters, police and the board of education are considering similar action.
The giant fund represents 300,000 city employees with $55 billion in assets. Close to $1.4 billion of that total is invested in hedge funds. Thursday’s vote comes in the wake of a study done by the American Federation of Teachers which found that of the 11 public pension plans examined, including the one in NYC, each fund paid, on average, $81 million in annual fees. The study also found that the portion of the investments staked in hedge funds performed poorly compared to the investments made to other vehicles other than hedge funds.
Various financial firms have recently received awards for their exemplary performance. The Carpinteria Sanitary District received the Certificate for Achievement in Financial Reporting; Anchin Block received the award for Best Global Accounting Firm (its sixth consecutive year). Grant Thornton LLP is being honored by the Tony Awards, serving as the “Official Professional Services Partner.”
Being recognized as a top firm – in whatever industry – gives a company a sense of pride and accomplishment. Despite the fact that Anchin Block has received this particular award now six times in a row, this level of excellence is something they work toward at all times. Indeed, according to Jeffrey Rosenthal, Partner-in-Chief of the firm’s Financial Services Group, they work very hard for their clients. “To say that we go beyond the expected is not just a catchphrase; it is what we actually do.”
In an article on Findsome & Winmore, Lauren Bowes concluded that: “Winning an award is a sign that your company is doing something right. From a marketing prospective, this can be an invaluable tool.”
Asian hedge funds have had their worst year so far in 2016 as a group. Yet there are a few funds that are showing profits despite the harsh financial climate.
One of those is Triada Capital. This Hong Kong-based firm includes among its founders an all-women team of credit investors from CQS Management. This group has posted a 4.5 percent gain in its credit long-short hedge fund so far this year. The fund, known as Triada Asia Credit Opportunities began trading in June, and uses event-driven strategies. January’s gain was 2.2 percent, and 2.3 percent for February.
Head of research Anna Tham and CIO Monica Hsiao founded Triada Capital in May, 2015 after working for the $14 billion London-based hedge fund CQS. The third founder, Jean-Marie Barreau, is CEO and COO. She ran hedge fund managed-account platforms for Deutsche Bank AG and Societe Generale SA.
Rubinstein, who was involved in the development of the iconic Apple products the iMac and the iPod, will be joining Bridgewater in May, 2016 along with Eileen Murray as co-CEOs. Bridgewater was launched by Ray Dalio, and now manages about $154 billion.
The hire is in keeping with a recent trend to hire technically oriented executives by financial firms in order to take advantage of their computer engineering skills which are becoming ever more crucial on Wall Street.
“We needed to bring in an exceptional co-CEO with a strong tech focus to supplement the existing leadership,” Bridgewater wrote in a note to its clients. “Technology is pervasively important at Bridgewater, especially since one of our major strategic initiatives in the coming years is to continue building out the systemized decision-making that has been so successful in our investment area and to extend it to our management as well.”
The FengHe Asia Fund, led by Matt Hu, thoroughly beat its peers last year by shorting China-related stocks and putting its assets in Vietnam and the Philippines. Deng Jiewen is part of the five-member team that manages FengHe, said that the economies of Southeast Asia are doing a better job of running their economies than their giant rival, China. Deng said that Chinese stocks are going to have a hard time in the coming months and beyond due to falling earnings. His fund climbed by 20 percent this past year while Asian stocks crashed.
The “Risk and Return” fund, the translated name of FengHe which is Mandarin, is one of just a few hedge funds utilizing investments in Asia’s smaller markets. One manager, John Foo of Kingsmead Asset Management, a Singapore-based hedge fund, said that Vietnam was the “brightest star in a dark night” in Southeast Asia.
“We remain quite positive about the Vietnamese economy and corporate earnings growth,” FengHe’s Deng said. “The Philippines has a strong demographic and economic structure. The country is becoming more friendly to foreign capital now.”
Last year was a bad one for many hedge funds, but funds using quantitative strategies seemed to fair better, and have had a strong start in 2016.
“There has been a focus on managed futures, systematic global macro and active equity recently that has been attracting some top talent and filling those niche roles that will add to the strategy and research aspects of their [quant hedge] funds,” said Ben Hodzic, managing consultant of quantitative analytics, research and trading, Americas, at Selby Jennings.
Known as “quants,” funds using electronic algorithmic traders and other sophisticated computer-dependent strategies, are in growth mode. The following funds are in looking to hire personnel to continue the growth they are experiencing:
What are these funds’ hiring managers looking for?
“Quant funds in particular are looking for the smart, analytical people right out of undergrad – such as math or econ majors from MIT or Wharton, for example – rather than pulling from investment banking or sales and trading floors,” says Crosby Baker, a managing consultant in the financial services and real estate practice at Korn Ferry Futurestep.
David Einhorn’s Greenlight Capital posted an excellent month in February, rising by 2.9 percent. The total increase for 2016 is 3.3 percent, outperforming the Standard & Poor’s 500 Index. That benchmark index lost 0.1 percent in February, and is down a total of 5.1 percent for the year.
The news was distributed to Einhorn’s clients via e-mail.
Greenlight is desperate for a good year after a devastating performance in 2015. The fund had its second largest losses last year, amounting to a decline of 20.4 percent for the year. Despite last year’s debacle, since the fund’s founding in 1996 it has repaid its clients an average of 16.5 percent per year.
Analysts, associates and portfolio managers were given the boot from Surveyor Capital, one of Citadel’s three internal units which invest in stocks globally. Citadel is based in Chicago and founded and headed by billionaire Kenneth Griffin.
At the end of January, the head of Surveyor, Jon Venetos, was dismissed and replaced with Todd Barker. Until this recent overall the number on staff at Surveyor was 200, most of them investment staff.
The layoff comes as Mr. Griffin is dealing with a rare stretch of losses for the company which has a sterling reputation as a money-maker. Only last year the Wall Street Journal reported in a Page One story that Citadel was in an aggressive and profitable expansion after experiencing serious losses during the financial crisis.
Last year Surveyor rose 14 percent, much better than similar funds.
“Surveyor has been a very successful business over time, and we have strong leadership and a great team in place,” a Citadel spokeswoman said in a statement.
Economist Savvas Savouri at London-based Toscafund Asset Management believes that the UK would be a “better place” if it disengaged itself from the European Union. Savouri wrote his opinion in a report called “Britain Stands Up—Better to Exit European Union.”
The Toscafund analyst stated that “If the EU doesn’t want to reform we should leave it.” He believes London’s place as Europe’s foremost financial center would not be harmed by a “Brexit” since there is “no plausible alternative.” He added that neither New York or Frankfurt could replace London in this “hugely important and lucrative role.”
Not everyone in finance agrees with Savouri’s assessment. Arguments on both sides of the controversy are coming to the fore now as UK Prime Minister David Cameron has promised to hold a referendum on EU membership before the year ends.
Chief Executive Officer Stuart Gulliver of HSBC Holdings Plc said that if Britain leaves the EU he would take HSBC and its 1,000 investment bankers to Paris. Money manager Crispin Odey of Odey Asset Management wondered out loud why it makes sense to stay as a “part of Europe that keeps mangling us.” David Harding, founder of Winton Capital Management, said that it is “vital” that the UK stays in the EU.