The New Wolves of Wall Street: Cooperating AI Entities

July 3, 2017 James Heinsman Hedge Fund News

According to Adam Smith, something called the “invisible hand” controlled the ebbs and flows of the free market. This so-called hand was the way Smith referred to the power which pushed the market towards equilibrium as huge numbers of self-interested individuals interacted with that free market.

This concept is about to take on a new type of “invisible hand.” San Francisco-based hedge fund, Numerai, is introducing a virtual currency which will be manipulated by artificial intelligence programs designed to cooperate, rather than compete, the traditional model Adam Smith based his theories upon.

Founded by South African technologist and a Cornell math major, Richard Craib, Numerai is an “open-source” hedge fund which has the potential to completely alter the singularly Darwinian approach to investing that has always characterized investing.

The currency is called Numeraire, and is a cryptographic token which will incentivize the modelling of the Artificial Intelligence that now guides the hedge fund’s trades.

The Numeraire smart contract was launched to Ethereum. Over 1.2 million tokens were deployed to a distributed network of 19,000 data scientists all over the globe. Numerai has already been trading for more than a year successfully, and now the company wants to tweak its methods. The company is hoping to come closer to the final goal of creating a completely decentralized, software-led hedge fund.

CEO Craib would like to see the Numeraire bring the open source philosophy to finance, similar to what the powerful effects networks have exhibited in such platforms as Facebook and Uber.

“Finance is totally competitive right now,” Craib said. “There’s no reason why you’d want to help your friend with a hedge fund if you have a hedge fund. But if you both held the same cryptocurrency, and it went up in value together, maybe there would be more collaboration.”


Adam Smith, artificial intelligence, crowd sourcing, Numerai, Numeraire,

Activist Hedge Fund JANA to Make a Bundle on Whole Foods Sale

June 26, 2017 James Heinsman In the News

Last Friday the giant online marketplace Amazon announced it was buying Whole Foods Market for $13.7 billion in cash. The price per share of the sale is $42, around 27% more than its Thursday evening closing price of $33.06

Barry Rosenstein announced last April that his activist hedge fund, JANA Partners, had a 9% stake in Whole foods. At the time the hedge fund had suggested that Whole Foods put itself up for sale.

At the end of May JANA owned about 26 million shares. Bloomberg estimated that the fund’s cost basis came to about $32.11 per share. Therefore the fund will be making a nice $260 million just by holding the shares for these few months.

Whole Foods’ CEO, John Mackey, referred to the owners of the hedge fund as “greedy bastards,” in an interview in TexasMonthly.

“We need to get better, and we’re doing that. But these guys just want to sell us, because they think they can make forty or fifty percent in a short period of time. They’re greedy bastards, and they’re putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it’s in their self-interest to do so,” Mackey told the TexasMonthly in late April.


Amazon, Barry Rosenstein, Jana Partners, John Mackey, Whole Foods Market,

Castle Harlan Portfolio Company Acquires School Meal Supplier in Southern California

June 19, 2017 James Heinsman Hedge Fund News

Compliance company Gold Star Foods acquired A&R Wholesale Distributors, in what is the third buyout deal made by Gold Star since it came under the ownership of Castle Harlan, Inc, a New York private equity company.

Gold Star Foods helps local school districts all over the USA adhere to the many state and federal rules and regulations related to government funding for school meal programs. They also insure compliance with the many regulations that govern nutritional content of school meals. A&R is a supplier of foods to schools in Southern California, and has been  for over 30 years.

Castle Harlan Senior Managing Director David B Pittaway expressed his thoughts about the deal:

“Like Gold Star, A&R is experienced in dealing with the complexities of the USDA Child Nutrition Program and helps to create meals that adhere to USDA nutritional standards and commodity guidelines. The combination of Gold Star and A&R will allow customers to benefit from access to new product categories, an increased number of SKUs, and higher service levels.”

The monetary value of the deal was not released to the public. Jeff Kuriel will continue to lead A&R from its plant in Anaheim, California. Eventually the headquarters will move to Gold Star’s location in Ontario, also in Southern California. When the move is complete Mr. Kuriel will join the Gold Star executive leadership group.

During the first quarter of 2017 Castle Harlan invested over $40 million in Gold Star Foods, bringing the total of their investment to over $60 million during the past year. Part of Castle Harlan’s investment was used to purchase Colyar Technology Solutions. Colyar is a designer, developer and marketer of food distribution and compliance management software. A new distribution center was built in Dixon, California, to support the expansion of Gold Star into the Northern California market.

“The acquisition of Colyar furthered Gold Star’s strategic shift into providing technology-enabled national school nutrition solutions to both states and local school districts,” said Patrick Zyla, Vice President of Castle Harlan. “Colyar’s web-based tools help to simplify the complex regulatory burdens faced by food providers in lunchrooms across the nation. Colyar assists in managing federal dollars by providing a platform to manage the application and administration of claims to the USDA, providing a link among local school districts, states and the USDA.”


A&R Wholesale Distributors, Castle Harlan, Castle Harlan Inc, Gold Star Foods, Jeff Kuriel,

Tarrant Sees AI as the Third Wave of Fund Management

June 12, 2017 James Heinsman Hedge Fund News

Jeffrey Tarrant, CEO and chief investment officer of Protégé Partners LLC, believes that future hedge fund managers will need to be able to be proficient in machine learning processes. He envisions a future in which funds using such machine learning will outperform and grow more quickly than funds using traditional strategies for investing.

“Artificial intelligence will fundamentally change investment management,” declared Mr. Tarrant.

Protégé manages $800 million in emerging hedge fund seeding strategies. In November, 2016 Tarrant started MOV37 LLC to invest in small, emerging hedge funds, but using autonomous learning investment strategies. He is also CEO and CIO of the infant company.

“This is the third wave of investment management. It’s populated by guys aged 25 to 38 who possess totally different skill sets” than those used by the first wave of discretionary managers and the second wave of quantitative managers, he said.

Managers of the future, which is already here, will need to know automation and be able to analyze huge amounts of data streams. He also said that the people with these skills today are “the guys whose parents yelled at them for spending too much time in the basement playing electronic games. They are wired differently and don’t give a (hoot) about the old models.”

What has really made the difference in terms of the present and future success of these new-fangled fund managers, who Tarrant likes to refer to as the “third-wave” of fund managers, is that “artificial intelligence is finally working,” Tarrant added.

Tarrant gave the following example of how far AI has come: It took a computer 38 years to become the world’s best checkers player in 1994; It took 12 years for a computer to beat the world chess champion in 1997; but it only took six years for a computer to finally beat Ke Jie, the world’s best Go player.


artificial intelligence, Go, Jeffrey Tarrant, Ke Jie, MOV37 LLC,

May Looks Good for Hedge Fund Managers

June 5, 2017 James Heinsman Hedge Fund News

As spring arrives not just flowers are blooming. Several hedge fund managers announced that their bets have finally beat the gains of the stock market in general, after a dark winter of slow growth.

Daniel Loeb, chief of Third Point, a $16 billion manager, told his investors that his Third Point Partners LP fund rose 2.1% in May, and the more aggressive Third Point Ultra posted a 3.5% gain.

William Ackman had similar news for his investors. Pershing Square Capital Management, an $11 billion fund, added 2.4% to its bottom line in May.

Both managers were able to beat the average for the hedge fund industry in the month of May of a 0.24% gain, while the S & P 500 stock market index had a 1.4% increase.

The past five months of 2017 was good to Loeb and his funds. Third Point Partners had a gain of 9.9% while the Ultra fund climbed 16.1% in the same time period. Ackman’s Pershing Square is up 4.3% since the year began, recovering from two straight years of shrinking.


Daniel Loeb, Pershing Square Capital Management, Third Point Partners, William Ackman,

Investments and Growth: The Silverfern Group

June 1, 2017 James Heinsman Company Spotlight

International multi-asset class investment management firm, the Silverfern Group recently announced some of its noteworthy investments and growth patterns.

Co-Managing Partner and CIO, Clive Holmes, together with co-Managing Partner Reeta Holmes, recently attended the firm’s 2017 Annual Meeting in New York City.  There, both partners spoke of the recent investments made in the company.

According to Clive Holmes:

“Silverfern’s two large, global networks – our base of investors spanning five continents and 23 countries, and our network of more than 50 operating executives and local operating partners –again provided us with a flow of private, off-market information that created unique investment opportunities last year.  We continue to add global diversification to our portfolio, while at all times remaining an informed, local investor.”

This sentiment was echoed by Reeta Holmes who said:

“2016 proved to be extremely productive for Silverfern as we made five new platform investments, three follow-on investments, and achieved three investment exits globally.  The pace of our investments in middle market private equity, real estate and private debt globally has been accelerating, and we expect it will continue in 2017.”

This is in addition to the company’s acquisition earlier this year of SAI Global (together with Baring Private Equity Asia) as well as its Broad River Power Holdings (in conjunction with Arroyo Energy Investors).



Clive Holmes, Clive Holmes Silverfern, Reeta Holmes, Reeta Kapani, Reeta Kapani Holmes,

Tips from One of the Most Successful Hedge Funds

May 29, 2017 James Heinsman Hedge Fund News

In a private First Quarter investor newsletter published by Elliot Management, five bits of advice are outlined. Billionaire Paul Singer founded the fund, which is now valued at about $33 billion.

The statement says:

“Some of these lessons needed to be actually experienced to be incorporated at a deep level in the decision making of a team, whereas others could be gleaned secondhand,” said the statement.

The following are bits of excellent advice.

•    No stock price is either too high or too low in order for it to go either higher of lower.
•    Market turns cannot be timed.
•    Large changes in market prices often happen way in advance of when the reasons for the changes become clear. By then it is already too late to incorporate the new information into one’s trading at the old prices.
•    It is extremely important to avoid significant losses. Why? To avoid a painful, or even terminal affect bad adversity has on the quality of a money manager’s decision-making abilities.
•    In order for money managers to succeed in the long term they must be able to have a wide and deep understanding about the world at large, and not just capital structures. They should know corporate business strategies and industry dynamics, which is absolutely vital to any future to the long-term success of money managers.


Elliot Management, Paul Singer,

Top Revenues for Hedge Fund Managers

May 23, 2017 James Heinsman Hedge Fund News

Despite the fact that investor returns for hedge funds were somewhat “disappointing,” hedge fund managers did not feel the pinch.  Indeed, over the last ten years the industry has encountered very bad returns with Daniel S. Loeb referring to it a “catastrophic period.”

Bringing home a staggering $11 billion, the top 25 hedge fund managers around the world.  between just two top earners (Renaissance Technologies founder James Simons and Bridgewater Associates founder Ray Dalio) a net of $3 billion was taken home.

How do they do it though exactly?  How are they bringing in these kind of bucks?  Simons himself recently pointed out that “Good performance, mediocre results or even downright ugly returns. When it comes to hedge funds, it scarcely matters.” So what is it that is making them so successful?  Later on in the article, Simons provides the answer.  He says:

“The key to these large paydays is the fee system known as 2-and-20. Hedge funds typically charge investors 2 percent of their investment annually, regardless of performance. So even in a disappointing year, managers still are paid a handsome sum. In the event they make a profit, the funds take 20 percent of that as well.”

The list – composed by Institutional Investor’s Alpha magazine – is generated on an evaluation of the percentage of hedge fund manager’s fund and performance fees, with a study of how they personally invested in the fund. When the list was first formulated back in 2000, compensation was half of what it is now.


Bridgewater Associates, James Simons, Ray Dalio, Renaissance Technologies,

The Top Hedge Fund Earners of 2016

May 17, 2017 James Heinsman In the News

We mean who brought home the most money, and not necessarily had the best returns, although these often go together considering the fees managers charge for performance.

Broadly speaking the hedge fund industry had lackluster year, but at least the numbers are black. Hedge Funds returned 5.4 percent, kind of anemic compared to the robust 11.9 percent of the S&P 500.

We also are well-versed in the story of the high fees driving money out of the industry. There was about 70 billion fewer dollars working for their investors compared to the previous year, the biggest loss of cash since 2009.

Yet, as was hinted at in the opening line, these less than stellar results did not seem to hurt the best managers much. According to Alpha magazine, the recently published list of the top-earning hedge fund managers, the highest ranked 25 heads of hedge funds ‘earned’ $11 billion in total in 2016.

Who made it to this list? Here are just the top 5.

1.    James Simons, founder of Renaissance Technologies. His yearly take home pay equaled $1.6 billion.
2.    Ray Dalio, founder and co-chief investment officer of Bridgewater. Earnings= $1.4 billion.
3.    John Overdeck, co-founder and co-chair of Two Sigma Investments. He made $750 million.
4.    David Siegel, co-founder and co-chairman of Two Sigma Investments. Also $750 million.
5.    David Tepper, founder and president of Appaloosa Management. He earned $700 million.


David Siegel, David Tepper, James Simons, John Overdeck, Ray Dalio,

Investors Anticipating Sohn Conference Predictions

May 8, 2017 James Heinsman Hedge Fund News

Monday marks the opening day for the 22nd annual Sohn Foundation Conference. The event draws some of the biggest names in the investment community, and predictions made here can influence the market.

Bill Ackman is returning to the podium at Sohn after taking a break last year after being a fixture at previous Sohn conferences. Founder of Pershing Square Management, Ackman has a great long-term record, but has hit a few potholes along the way, apologizing to investors for his bad advice to bet on Valeant Pharm International, plus his short bet on Herbalife.

Sohn participants are eagerly waiting to hear from founder and chief executive of Social Capital, Chamath Palihapitiya whose advice last year to buy Amazon worked out well. He said Amazon had plenty of room to grow, well on its way to becoming a $3 trillion company. In the 12 months since Chamath made the call Amazon’s stock is up 40 percent.

Jeffrey Gundlach, bond trader guru and CEO of DoubleLine Capital, told people a year ago to watch out for the possibility of Trump winning the election. Expounding his well-known contrarian views he told Sohn attendees: “I think you need to prepare for a Trump presidency.”


Bill Ackman, Chamath Palihapitiya, Jeffrey Gundlach, Sohn Conference, Sohn Foundation,

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