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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Women-Run Funds Outperforming Those Managed by Men

September 25, 2017 James Heinsman In the News

According to the HFRX Women Index, a list that examines the success (or lack thereof) of hedge funds run by women, revealed that women-run funds outperformed male-run funds by 2.5 times. This finding is one more bit of evidence that the hedge fund sector, which has been labeled as “male, pale and stale,” could use more women portfolio managers.

Women-run funds returned on average 9.95% during the first seven months of 2017, while a broader grouping of funds returned 4.81% for the HFRI Fund Weighted Composite index.

Head of personal investing at Legal & General Investment Management, Helena Morrissey, is wary of the figures, since HFRX data looks like it was collected in a shorter period. But she added that other research has confirmed that women are “at least as good as men” when it comes to investing.

“We definitely need more women in fund management, because we bring slightly different approaches to analysis and risk. Our diversity is complementary,” she said.

In one study done at the University of California, Berkeley, which examined 35,000 households from 1991 to 1997 with large investments, men earned annual risk-adjusted net returns that were 1.4% less than those earned by women. The difference was due to men’s penchant for trading more often.

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Helena Morrissey, HFRX Women Index, Legal & General Investment Management, UC Berkeley,

Hedge Funds Looking to Metal to Pad Their Portfolios

September 19, 2017 James Heinsman Hedge Fund News

Metals are doing well these days, reaching some of their highest prices in six years.
After years of little growth, investors are expecting to see further rises in prices as part of a general trend of prices for industrial metals in reaction to production cuts to shrink a supply glut.

Production cuts came a bit too late for some specialist metals hedge funds, which were forced to close due to the oversupply. Among those that closed were Apollo Global Management and Hall Commodities.

The market is also responding to China’s new environmental measures. China is the second-largest economy in the world, and the single largest consumer and producer of industrial metals. As a polluting industry, the manufacture of metals has been curtailed in China, thus contributing to the resolution of the glut crisis.

“We’re seeing renewed interest in metals for a number of reasons … including portfolio diversification and six years of a bear market,” said Gerardo Tarricone, founder at Arion Investment Management.

Hedge funds with significant bets on metals have reaped at least 4% in the 12 months until August 2017. Although some managers are excited by the results, others are proceeding with more caution.

“I have always looked for somebody that could add alpha in the metal space but find it difficult, ” said one hedge fund manager.

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Apollo Global Management, China, glut, Hall Commodities, Industrial metals,

Three Caught Trading on Insider Info

September 11, 2017 James Heinsman In the News

A vector render of the iPhone 7 Plus in the flagship Jet Black color. Photo courtesy of Rafael Fernandez.

Two friends from college with aspirations to owning a hedge fund company were caught trying to cash in on Amazon insider info.

Washington state residents Maziar Rezakhani and Sam Sadeghi paid $10,000 to Brett Kennedy, an Amazon analyst, for information about the online retailer’s 2015 first-quarter earnings. The pair of hedge fund wannabes used that information to make $116,000 in profits, boasting beforehand on message boards that he could easily predict what Amazon’s earning were going to be.

“Rezakhani boasted on social media that he could accurately predict Amazon’s financial performance,” said Jina Choi, head of the SEC’s San Francisco office. “But he failed to predict that we would catch him and his accomplices in their illegal scheme.”

Rezakhani, however, is already in jail after he pleaded guilty to a separate scheme to defraud Apple Inc, the IRS, shipping firms and a small bank. The plan involved the purchase of Apple iPhones to resell, which he claimed were lost/stolen while shipped. It was alleged that he concocted the scam to pay or his over-the-top lifestyle. Now he owes his victims $3.5 million in restitution.

Kennedy, the man who sold Amazon’s information, is facing criminal charges. He has already said he would pay more than the $10,000 he made to settle with the SEC without having to admit whether he is guilty or not of committing a crime. Sadeghi also is settling with the SEC, agreeing to a $24,000 penalty without admitting to any wrongdoing.

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Amazon, Apple, Brett Kennedy, insider trading, iPhone,

Crypto Currencies Are Hot Now

September 3, 2017 James Heinsman In the News

Hedge funds can’t get into the cryptocurrency investor space fast enough, it seems. There are now at least 800 digital currencies, such as Bitcoin, which are not centralized, but rather rely on what is known as distributed ledger technology. These various currencies, when combined, have a marketcap of about $166 billion, and are attracting investors like bees to honey.

Financial technology analytics company Autonomous NEXT published a list of 55 cryptocurrency hedge funds last week, highlighting the growing appeal of the sector.

“Like wild mushrooms, crypto hedge funds have been taking root in the volatile and unregulated soil of the crypto economy,” Autonomous NEXT wrote on their website. “So we went digging, and digging and digging,” they stated.

One of the newer funds on the list, 1confirmation, was launched on August 22, 2017 and is backed by the high-tech billionaire and star of the reality TV show “Shark Tank,” Mark Cuban.

It is no wonder hedge fund managers are siting up and taking notice. Since 2016 Bitcoin’s value has grown by 700%. The 3300% rise of Ether during the same time span gives new meaning to “meteoric price rise.”

In addition, the market for initial coin offerings, or ICO’s is going gangbusters, with more than $1.8 billion raised since the early days of 2017. ICO’s use a novel method to raise funds based on blockchain technology, what else?

Traditional hedge fund managers have noticed the party.

“We have seen managers invest in the actual currencies and/or in the ICOs, and soon there will be derivatives as well,” Steve Nadel, a hedge fund attorney said. “Cryptocurrencies have garnered a fair amount of interest in the investment management space, primarily because of the returns they have recently shown.”

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Companies Trying to Attract Women to Hedge Fund Sector

August 24, 2017 James Heinsman Company Spotlight

The hedge fund space controls an estimated $3 trillion, and women manage about 1 percent of that. Of every 100 fund managers, only 20 are women. This data shows starkly the glaring gender imbalance is this exclusive club of hedge fund executives. This is contrast to the strides gender equality has made recently in other areas of the financial services sector.

A study done in 2015 by Northeastern University showed that the differences between men and women in the hedge fund industry is one of the worst in finance. There are 9,081 companies in the United States that employ male portfolio managers compared to a minuscule 439 that have women in the same job.

“There is a very strong negative stereotyping that occurs out there and it’s really destructive,” said Chief Executive Jane Buchan of PAAMCO, a fund of hedge funds. “Women are leaving asset management because they think it is too much of an uphill battle. They say ‘I’ll just go work in tech instead’.”

Some funds, like Man Group and DE Shaw, are finding ways to draw more women and keep them.

“It is hard enough to find great people without excluding half the population,” Man Group’s President Jonathan Sorrell comments. Man Group is the world’s largest publicly traded hedge fund, with about $96 billion in assets under management.

Man Group has instituted things like informal quotas of at least an equal balance of male and female candidates for each job opening; targeting more college-age women to employ for their graduate program to work in technology; and has instituted a “returnship” program to attract women who took an extended leave from work.

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Navigating the Complexities of Social Security Benefits

August 16, 2017 James Heinsman Economic Barometer

As people approach retirement age, they naturally need to become familiar with what are the most beneficial practices regarding Social Security payments. Financial advisory companies such as Connecticut-based Essex Financial, are good sources of help when navigating the particulars of this universal entitlement.

Everyone born after 1929 is entitled to Social Security benefits if they have worked for at least ten years in order to earn the mandatory 40 credits. But even if you have already earned 40 credits, the money cannot be paid until the recipient reaches the minimum age of 62. Every year, three months before a person’s birthday, the Social Security Administration mails a summary of every person’s benefits. The yearly statement includes a history of earnings, accumulated credits and an estimate of the benefits a person will be entitled to if he/she waits until full retirement age. Always check the statement is accurate, since your benefits are determined by lifetime earnings.

Until 1983 “full retirement age” was 65, but that year Congress voted to raise the age of full retirement to 67 for people born in 1960 or later. For someone born between 1938 and 1960, the full retirement age varies.

A new study done by the Boston College’s Center for Retirement Research showed that about 42 percent of men and 48 percent of women still take their benefits at age 62 with the average age being 64.

It is understood by most that the earlier a retiree begins to collect his/her benefits, the lower those monthly payments will be. What is not well understood is how large that difference is. For instance, if someone’s full retirement age is 66, if he begins to collect at age 62 ½, he nets a 25 percent lifetime benefit reduction, while waiting until age 70 will give him a 32 percent credit.

CEO Chuck Cumello of Essex Financial Services, along with many other financial services firms, are there to help clients navigate the complicated details of Social Security benefits, as well as other financial issues.

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Chuck Cumello, Connecticut, Essex Financial, Essex Financial Services, Social Security,

Cryptocurrency Hedge Funds Growing Exponentially

August 10, 2017 James Heinsman In the News

Plate which indicates the location of a Bitcoin ATM. Graphic courtesy of Mrnett1974

According to a tweet by economist Tuur Demeester, “Hedge funds with crypto exposure exploding.” The article Demeester refers to says that there are more than 70 funds with such bets now coming up in the hedge fund pipeline.

The article also has a statement by Arthur Bell manager Corey McLaughlin:

“I’ve been in the hedge fund space since 1998, and I’ve never seen anything like it in volume of launches in a particular area. It’s just crazy.”

What is trendy among hedge funds is usually a sign of what vehicles have the best potential for quick ways to make money, without paying much attention to the exact sector the investment is betting on. The market for hedge funds is always changing since investment vehicles are always in flux and move like fallen leaves with the financial trends.

In recent months, the prices of cryptocurrencies have been on the rise, drawing attention to the market from hedge fund investors. Funds already invested in such currencies were considered edgy until they started showing nice profits as the market for Bitcoin and other similar currencies began to boom at the beginning of the year.

With prices and demand rising, managers want to cash in by creating new funds that link to cryptocurrencies. At the moment there are at least 70 funds coming up for investors to bet on Bitcoin and similar currencies.

 

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Arthur Bell, bitcoin, Corey McLaughlin, cryptocurrency, Hedge Funds,

Discount Fees Attracts Money to BlackRock Style Advantage Fund

August 3, 2017 James Heinsman Company Spotlight

At a time when many, if not most hedge funds are losing assets, one fund has doubled its assets over the past six months.

BlackRock’s Style Advantage fund grew to $1.6 billion during the first half of 2017 doing something other funds have been fearful of doing: charging less than the almost sacred 1% management fee. Style Advantage took a risk and decided to charge its clients only .95% management fee, and nothing for performance. In addition, clients only need alert the fund three days in advance before withdrawing their funds.

BlackRock has already been charging super cheap fees on exchange-traded funds (ETFs), and saw that investors in hedge funds also want to save money. Style Advantage was launched in November 2015 as part of a group of strategies by Columbia University professor Andrew Ang. Style Ad is the most inexpensive fund of the 18 on the list.

Other funds have tried lowering their fees in response to the exodus of investors from the hedge fund market as a result of dissatisfaction with high fees and poor performance. In March Winton said it was going to cut its fee to 0.8% and 0.9%, depending on the size of the investment. Tudor Investment Corp and Brevan Howard have also lowered their fees.

 

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Andrew Ang, BlackRock, fees, Style Advantage fund,

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