Chidem Kurdas
Recently Russia announced an export ban on grains and BHP Billiton made a contested offer to buy Potash Corp. Long before those events moved agriculture to the headlines, JP Morgan’s hedge fund unit made a big bet on a fertilizer company. (more…)
It sounds like some key investors favored the restructuring plan instituted last year for the main Cerberus Capital hedge fund, even as many customers made it clear they wanted their money back.
The plan gave the manager the right to transfer the assets in Cerberus Partners to a new fund, a special-purpose vehicle, and charge a management fee for this SPV. Reportedly clients asked to withdraw 70% of the fund’s assets in 2009. (more…)
The portfolio of the Bill & Melinda Gates Foundation’s endowment is remarkably stable over time. In part this is because Warren Buffett contributes Berkshire Hathaway shares, which account for a huge chunk of the endowment—$5.9 billion as of July. But the rest of the portfolio does not change much either, consistently emphasizing large-cap companies.
This worked to the endowment’s favor in the past year. As a recent report from Goldman Sachs says, “the biggest publicly traded companies have substantially outperformed the rest of the corporate sector and the economy as a whole.” (more…)
Chidem Kurdas
Long/short credit funds were the top performers year-to-date as of July, returning about 7% according to Greenwich. That’s pretty good, considering that the Greenwich Global Hedge Fund Index is up only 1.3% while major equity markets are in the red.
In large part this a classic story of bottom feeding. Snap up paper that got labeled “toxic” in the crisis and became absurdly cheap. Then wait till prices start moving back to reasonable levels—which did not take as long as one might have expected from the severity of the crisis.
A credit fund that’s found favor with certain large investors is One William Street Capital Partners, started by David Sherr, who headed Lehman Brothers’ securitization business but left more than a year before the bank’s collapse in 2008. (more…)
Chidem Kurdas
Investors don’t like the idea of having their money locked up. A noticeable aversion to long-term commitments – compared to before the 2008 crisis – appears to be here to stay.
But certain strategies are difficult or risky to carry out without a stable capital base. Managers with those strategies want to discourage redemptions, at least for new money coming into funds.
The answer may be a soft lock-up, a more flexible provision than the usual agreement to keep the capital in the fund for the first one or two years. (more…)
Chidem Kurdas
It’s hard to get a loan these days. Even borrowers with substantial assets find that banks are picky about what they’ll accept as collateral.
Certain hedge funds are widely used for this purpose, says an investor. But others are out of the question—banks won’t touch them with a 10 ft pole. This factor is influencing investors’ decisions as to which funds to put money into. (more…)
Chidem Kurdas
Will hedge fund managers run exchange-traded funds? That question arises as ETFs spread to a variety of strategies and demonstrate growth potential. Total assets are at $793 billion after a net inflow of $105.4 billion in the past 12 months, according to Morningstar.
ETFs are migrating to active management, says Sue Thompson, managing director at iShares, one of the largest ETF providers. To what extent this takes assets away from mutual funds is uncertain. There is a move to active ETFs but you don’t see people leaving mutual funds so much, said Peter Crawford, senior vice president at Charles Schwab & Co., at a briefing organized by Schwab.
For hedge fund managers, ETFs have a major drawback. (more…)
Chidem Kurdas
When people look for investment areas that are not crowded, one possibility is small business development. Few investors have the required expertise or patience. Certain geographies are more underserved than others in this respect and hence offer greater opportunity.
A few private equity and hedge funds specialize in small firms and regions that don’t get attention from big financial players. Often the managers and their investors are connected to those areas.
Thus the Iowa Corn Growers Association is setting up a fund to take advantage of attractive financing transactions in Middle America. (more…)
Chidem Kurdas
Investors complain that hedge funds promise positive performance in all types of markets and then lose money. What happened to the supposed absolute returns, they ask. For their part, hedge fund people point out how much smaller their losses are relative to, say, the S&P 500 Index.
Och-Ziff Capital offered an interesting comparison at this week’s earnings conference call. Daniel Och suggested that his fund’s performance over 16 years demonstrates the ability to generate absolute returns and alpha.
Strictly speaking, the OZ Master Fund did not escape losses during bad years. But the losses were sufficiently limited to justify Mr. Och’s claim of preserving capital in down markets. (more…)
Chidem Kurdas
Having completed its acquisition of Citigroup’s hedge fund investing and seeding business, Anthony Scaramucci’s SkyBridge Capital is looking to raise money.
It will offer a former Citi fund of funds for a relatively low minimum initial investment of $25,000, with the intention of raising more than $1 billion over time. (more…)
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