Elliott invests multibillion-dollars in Salesforce

Elliott Investment Management has made a multibillion-dollar investment in Salesforce. Salesforce tripled its workforce over the past four years and purchased Slack in 2021 for $27.7 billion; the company also hired during the Covid pandemic. However, now Salesforce’s sales have slowed, leading to a period of layoffs and a deep stock market drop. Many of the executives have left the company, and Salesforce recently announced that it would be cutting 10% of its employees and reducing its real estate holdings.

Managing partner at Elliott explained about their investment,

“Salesforce is one of the preeminent software companies in the world, and having followed the company for nearly two decades, we have developed a deep respect for Marc Benioff and what he has built. We look forward to working constructively with Salesforce to realize the value befitting a company of its stature.” While Elliott has invested in many tech companies, it remains unclear what their goal is with their Salesforce investment. Their goals often lay in board representation and pushing for strategic inter-company changes.

Hedge Funds to Watch in 2022

As the year draws to a close, it is an opportunity to look at the investments being made by strategic money managers and what they are expecting to see from their capital moves. Tracking the recent quarterly activity of hedge funds that have taken large positions in particular companies or those that have expanded long-standing positions, allows us to highlight the bullish signals indicating a company’s prospects for yielding significant returns.

U.S. News and World Report published their list of 2022’s top hedge funds. The list included the “usual suspects”: Scion Capital Management LLC (Michael Burry of The Big Short fame), Citadel LLC (Ken Griffin), Bridgewater Associates LLC (Ray Dalio), Renaissance Technologies LLC (Jim Simons), and Elliott Investment Management LP (Paul Singer).

Modeling billionaire investors makes a lot of sense; they have proven results and loads of experience. But there is also a backlog. The data is often retrospective in nature. A hedge fund only files the 13F typically six weeks after the quarter has concluded, which leaves a big window for managers to offload.

New Investment Opportunities for Hedge Fund Industry

The pandemic continued to affect the economy throughout 2021, hedge funds proved to be a flexible and adaptive industry. New investment strategies and strong earnings also yielded an improved opinion of hedge funds in general, according to the 2021 EY Global Alternative Fund Survey.

210 managers and 54 investors participated in the survey and showed that the industry is taking on new prospects for investment including digital assets and special-purpose acquisition companies (SPAC).

The survey also showed that hedge funds are focusing more on environmental, social, and governance (ESG) standards in the investment decisions process. Similarly, attention is being given to considerations of diversity and inclusion at the managerial level. But even while fund managers indicated substantial diversity in the back offices, fewer than one in 10 hedge funds can claim 30% or more females in the front office. The representation of minorities is even lower.

2 New Leaders at Bridgewater

Bridgewater, the largest hedge fund in the world, has appointed two new CEOs.  Nir Bar Dea, who is being promoted from his current role as deputy chief executive of Bridgewater, and Mark Bertolini, a member of the board of Bridgewater.

Bar Dea, 40, has been with Bridgewater since 2015; he has been deputy CEO since February 2021. Bar Dea once served as a major in Israeli Defense Forces and has been the primary strategist for Bridgewater’s pandemic policies and planning. Bertolini, 65, has been on the board of Bridgewater since 2019. From 2010 through 2018, he was CEO of Aetna, the American insurance company.

The pair will lead Bridgewater instead of David McCormick who recently announced his intention to run for U.S. Senate.

Bridgewater has some 1,500 people on staff and manages pensions, sovereign wealth funds, and other big investors in the amount of nearly $150 billion.

Hedge Fund Consolidation: Eisler Capital and Glen Point Capital

Mergers and acquisitions are not a common step for hedge funds. But the increased stresses of the industry, including skyrocketing costs and investors’ penchant for established entities, is forcing many funds to close their doors. Some are opting to merge with bigger institutions, like Eisler Capital which is acquiring Glen Point Capital in a rare hedge fund consolidation.

The transaction expands Eisler’s assets by $1.5 billion, bolsters the staff with new traders, and adds three new funds. Cumulatively, the deal transforms the firm into a multi-strategy investment platform.

Both firms are based in London and started in 2015. Over time, Eisler has expanded their portfolio as part of its efforts to compete with Millennium Management and Citadel for investors, resources, and staff. The deal is expected to close in March and the specifics of the financials were not made public.

Female Founded Hedge Funds is (finally) on Trend

According to the Kresge Foundation, female leadership in hedge funds represents less than 10% of the overall industry. But nine new funds are indicative of a long-awaited change in the hedge fund industry: they are being led by women.

These women have spent their initial years in the industry earning money and fostering connections that they are now using to start their own offices. This also coincides with the investor climate that promotes diversity as a means of boosting performance.

Many of these firms have exceeded $1 billion in assets including Angela Aldrich’s Bayberry Capital Partners and Lauren Taylor Wolfe’s Impactive Capital LP. This puts them on the coveted and exclusive list of nearly 500 funds at that level.

“More investors are recognizing that day-to-day investing is about decision-making, and the science is very clear that more diverse teams make better decisions. Why would we think that every good investment idea needs to come from a White male?”

Rob Manilla, vice president and chief investment officer at the Kresge Foundation.

New Hedge Fund Index App

PivotalPath, the hedge fund consultant firm, recently released the new Hedge Fund Index App, as a way of simplifying and heightening the benefit of hedge fund indices. While institutional investors use these indices for thoughtful decisions on asset allocation and evaluation, there are inherent systemic issues that curtail their usefulness. The new app offers applicable information, necessary context, and diagnostic/investigative tools to fully comprehend performance, even across strategies and funds.

Since its founding in 2013, PivotalPath has worked with leading investors, like the Robin Hood Foundation, and has provided better techniques and methods, as well as a more illustrative set of funds, for hedge fund professionals. One of the app’s most impressive features is the never-before-seen transparency and protection.

“Our unique philosophy as a hedge fund consultant has always been based on a simple question; how can an allocator make a good hedge fund investment decision if they don’t know all of the relevant choices? This is why we build the most robust peer groups and indices, so our clients not only know their full set of options, but have the transparency and tools to accurately evaluate, benchmark and monitor their hedge funds in the right context.”

Jon Caplis, founder and CEO of PivotalPath

Sculptor Capital Management is an Emerging Hedge Fund Favorite

Sculptor Capital Management, Inc. (NYSE:SCU) had a place in 19 hedge funds’ portfolios by the end of Q2 2021. This is remarkable particularly because the previous all-time high was 17.

Specifically, Renaissance Technologies, maintained the largest position in Sculptor, with a $1.3 million investment at the end of the quarter. ExodusPoint Capital also took up a $0.3 million share at the same time.

SCU stock returned 3.4% since the end of the second quarter and has consistently outperformed the market by wide margins.

Sculptor’s current success and favor might stem from its recent change in leadership.  Jimmy Levin, as the new CEO, is committed to an investment model that is based on full collaboration across their teams and products. In turn, this has yielded a boost in 2020 returns. Their new dividend policy favoring shareholders has equated a 12% yield at the current share price ($3.19 in dividends), which is likely also a contributing factor.

Elliot Management Relocating to Florida

Postcard of West Palm Beach courtesy of Boston Public Library, Print Department

Activist investor Paul Singer has decided to move his $41 billion hedge fund manager to Florida, joining a growing number of investment companies looking to lower their state tax burden.

Elliot Management will keep some office space in Manhattan, but his new headquarters will be in West Palm Beach. He will also open offices in Greenwich allowing some of his employees to stay where they are.

The pandemic is only one of many reasons for companies to leave New York City and head south to Florida. Financial firms were already beginning their exodus from expensive locations like New York and San Francisco to more business-friendly places. Paul Tudor Jones and Wexford Capital have already moved to Palm Beach, an area especially attractive to financial companies. Carl Icahn also left Manhattan, making his new headquarters in Sunny Isles Beach, Florida.

With no state income tax, estate tax or inheritance tax, Florida is an attractive alternative for many companies. New York’s top income tax rate is over 8%.

Since the pandemic’s arrival, many companies have allowed their employees to work remotely, thus prompting a surge of people out of the city center, which is not only expensive but more dangerous in terms of contagion.

Investor Soo Kim Buys Rights to Bally’s Brand for $20 Million

Neon sign of Bally’s Hotel at The Strip in Las Vegas, Arizona, USA

Soo Kim, 45, hedge fund investor and owner of gaming company Twin River Worldwide Holdings, purchased the global rights to the Bally’s name from owner Caesars Entertainment.

The $20 million purchase will give Kim the rights to put the name on all of his gaming investments which include 11 casinos and his publicly traded headquarters.

Kim will also be changing the ticker name TRWH to a more appropriate name for the Bally’s brand. He added that the company will be starting a sports-betting site online branded with the Bally’s moniker.

“This is an opportunity for us to revive a brand that is synonymous with American gaming,” said Soo.

He is a co-founder of the hedge fund Standard General, which has a 39% stake in TRWH. Soo is also the chairman of Twin River.

Bally’s has a long and successful history in the gaming space, getting its first huge boost as Bally Entertainment, the company behind the wildly popular Six Flags amusement park chain. It also owned Bally Total Fitness and a video game company with a stable of iconic arcade games during the 70s and 80s including “Space Invaders,” “Pac-Man,” and “Ms. Pac-Man.”

In 1996 Hilton Hotels acquired Bally’s casinos for $2 billion, resulting in the largest gaming company in the world. In 2003 Bally’s casino generated more revenue than any other casino in Atlantic City, beating out even the second-place Trump Taj Mahal.

Now there are only two Bally’s casinos; one in Atlantic City which is the one Soo Kim bought for $25 million, and the one in Las Vegas, which Caesars still owns.

The deal for the brand allows Soo Kim to put the Bally’s name on all present and future properties but does not require Caesars to rename its casino in Las Vegas.

Twin Rivers, based in Rhode Island, owns many other gambling properties in six states, as well as a racetrack with 13 authorized off-track-betting parlors in Colorado.

Since the pandemic has shuttered gambling halls Soo Kim has been snatching them up like hot cakes, buying three properties this past April alone.

“We appreciate Caesars giving us a chance to use a brand they really weren’t utilizing,” Kim said.