Hedge Funds 1 0.11.11 Bloomberg BRIEF News, aNalysis aNd CommeNtary MKP, Gramercy Among Funds Bucking Sept. Slump BY KELLY BIT Amundi’s Chen to lAunCh AsiA fund Hedge funds run by mkp Capital management llC, Gramercy, fore research & Kevin Chen, who left Amundi Alternative Invest- management lp and marshall wace llp were among those posting positive returns ments last month, has formed Anji Capital, an Asia-focused global macro fund. page 4 last month as the industry on average slumped 3.2 percent, according to the Bloomberg aggregate hedge-fund index. Gillon, soffer stArt mbs strAteGy The funds increased cash levels, bought credit default swaps and shorted indexes, Zvi Gillon, most recently at Credit Suisse, and individual stocks and currencies to make gains during the index’s worst month in more Ga’ash Soffer, from Level Global Investors, have than a year. started Rion Capital in New York. page 4 MKP Capital Management’s $1.5 billion global macro fund, MKP Opportunity, gained hArbinGer will Allow redemptions 4.4 percent in September and 13 percent this year, according to two people briefed on Philip Falcone’s Harbinger Capital will permit the returns. The fund, managed by the firm’s Chief Executive Officer and Co-Founder clients who’ve been unable to withdraw all their patrick mcmahon, was positioned for slower global growth, lower rates and a stronger money for almost three years to sell their stakes U.S. dollar, the people said. The fund was long the U.S. dollar versus the Australian to a third party. page 3 dollar and euro and shorted emerging market currencies, the people said. It was also long U.S. rates, the U.S. and European bond markets and some of the Australian bond pAulson Clients sAid to pull funds John Paulson has received less than 10 percent market, they said. in redemption requests for two funds. page 4 Gramercy, a Greenwich, Connecticut-based investment firm that oversees more than $2.5 billion, increased cash levels, cut long positions and profited from widening performAnCe snApshot: l/s equity spreads in emerging market credit default swaps, according to robert koenigsberger, Dorsal Capital Partners leads Criterion Capital chief investment officer and portfolio manager at the firm. and Aker Asset Management in this year’s long/ Gramercy’s tail risk fund, managed by Koenigsberger, jumped 35 percent in Septem- short equity tables. page 10 ber and is up 58 percent this year, according to a person familiar with the fund’s returns. GlC’s bell hAs u.s. Growth piCkinG up Its master fund, also managed by Koenigsberger, gained 1.5 percent last month and 1.8 The U.S. economy is “slightly pikcing up,” ac- percent this year, the person said. Its macro fund, managed by Ajay Jani, advanced 2.7 cording to GLC Ltd. Chief Economist Steven percent in September and 1.4 percent in the first nine months of the year. Bell. page 6 “In the third quarter, emerging market sovereign spreads were finally catching up to the widening we’d seen in Europe,” Koenigsberger said in a telephone interview. “The mArket CAlls, revisited How predictions from Eclectica Asset Manage- world started to believe that emerging markets were less volatile, or somehow decou- ment, Omega Advisors, Michael Burry and Phoenix Investment Adviser fared a year later. page 6 selected hedge funds’ performance 13f forensiCs FirM Fund SePteMBer return % Ytd return % Hedge funds, led by SAC Capital, were net buyers of Community Health Systems Inc. in the Gramercy tail risk 35 58 second quarter. page 7 marshall wace mw Global opportunities 6.5 24 reGulAtory/CompliAnCe High-frequency trades will be a topic at the FSA exis Capital walrus Capital 6.1 18 summit in London later this week. page 8 stonePine asset management Flagship 4.5 5.5 over the hedGe Bill Ackman greeted and entertained at the Park mKP Capital management mKP opportunities 4.4 13 Avenue Armory gala in New York last week. Fore research & management multi-strategy 2.9 8.9 page 9 Gramercy macro 2.7 1.4 CAlendAr pages 12-13 Vollero Beach Capital Partners Flagship 2.7 12 spotliGht Gramercy master Fund 1.5 1.8 Platinum Partners Managing General Partner Uri Landesman discusses the firm’s investment Newbrook Capital Flagship 0.8 14 process. page 14 Source: Investors, individuals familiar with the matter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 2 mkp, gramercy … pled. As a result, we could buy insurance cheaper in emerging markets. Given the world hedge fund returns is interconnected, when you have contagion, it attacks all credits.” Bloomberg BAIF indices, which represent all funds Fore Research & Management, the New York hedge fund that has about $2 billion in tracked by Bloomberg data, are the source of the assets, gained about 2.9 percent last month in its multi-strategy fund, which has $1.5 below hedge fund and fund of funds data. billion, and 8.9 percent this year, according to a person familiar with the matter. The Hedge Funds Funds of Funds S&P 500 2-Year Treasuries fund had various short positions, Al moniz, a portfolio manager who covers Europe for 15.06% (Merrill Lynch Total Return Index) the fund, said. “In the most recent quarter, the fund had short positions in European sovereigns and financials and highly levered, fundamentally challenged companies in the U.S.,” Moniz 8.18% said in a telephone interview. “The fund also maintained short credit exposure to Japan, 3.90%* both through the sovereign as well as cyclical companies, which were trading signifi- 2.47% 1.36% cantly tighter than their global peers.” -8.68% The Lyford Global Macro Fund, a discretionary global macro -0.89% -1.03% strategy, shorted European equities through Germany’s 2010 total returns benchmark DAX Index, U.S. equities through S&P futures and 2011 YTD total returns commodities through copper and the Australian dollar, said *fromFeb. 26, 2010 samer nsouli, chief investment officer and portfolio manager of the fund. bloomberg brief hedge funds “Our view was that the stress coming out of Europe was newsletter Ted Merz going to eventually affect the rest of the world and that was executive editor [email protected] the biggest cloud hanging over the market,” Nsouli said in a 212-617-2309 telephone interview. “As long as there was no solution coming bloomberg news Rob Urban out of Europe, all risk assets would be sold.” managing editor [email protected] 212-617-5192 The fund climbed 11 percent in September and 10 percent hedge funds Nathaniel E. Baker this year, according to a person briefed on the returns, who editors [email protected] asked not to be identified because the information is private. 212-617-2741 Robert Koenigsberger stonepine Asset management llC, a Dallas-based long/ Melissa Karsh short U.S. small- and mid-cap hedge fund, advanced 4.5 [email protected] 212-617-4557 percent in September and 5.5 percent this year, according to a preliminary estimate. The fund was able to post returns with its short positions, said Jay rushin, portfolio reporter Kelly Bit [email protected] manager and managing partner at the firm. StonePine shorted stocks within industrials, 212-617-1097 energy and technology, he said. Contributing Katherine Burton “We were net short the entire third quarter,” Rushin said in a telephone interview. “We’ve reporters [email protected] been keeping risk way dialed down. As Europe and Greece started boiling over and the 212-617-2335 debt debacle here in Washington, we gained more conviction in our negative calls.” Saijel Kishan fehim sever, who manages Marshall Wace’s $550 million MW Global Opportunities [email protected] 212-617-6662 Fund, said he had a “slightly negative view” on capital goods and industrials coming into the third quarter. “We thought the risk and reward for an equity investor in that sub- Contributing Matthew Kelly data editors [email protected] segment was skewed to the downside given that the end demand for industrial products 609-279-5064 was slightly slowing and at that juncture companies were sitting at a high margin and Anibal Arrascue high valuation,” Sever said in a telephone interview. [email protected] The fund had a “positive view” on agricultural companies due to their positive supply 609-279-5084 and demand dynamic and “a negative view on base metals, which were exposed to a newsletter Nick Ferris potential slowdown in China,” he added. business manager [email protected] 212-617-6975 “The balance sheet health of companies was a big differentiating factor for our fund in the last quarter,” Sever said, declining to discuss individual positions. The global long/ Advertising [email protected] 212-617-6975 short equities strategy gained an estimated 6.5 percent last month and is up 24 percent year-to-date through Sept. 30, according to an investor. reprints & Lori Husted permissions [email protected] Other funds that posted positive returns included exis Capital management inc.’s 717-505-9701 Walrus Capital strategy and newbrook Capital partners lp. New York-based Exis To subscribe via the Bloomberg Professional Capital, managed by Adam sender, gained 6.1 percent last month to bring year-to-date Terminal type BRIEF <go> or on the web at returns to 18 percent, according to an update to investors, a copy of which was obtained www.bloomberg.com/brief/hedgefunds by Bloomberg. © 2011 Bloomberg LP. All rights reserved. Newbrook Capital, the $350 million fund managed by robert boucai, gained 80 basis This newsletter and its contents may not be points last month and 3.6 percent for the third quarter, bringing year-to-date returns to forwarded or redistributed without the prior consent 14 percent, according to an update sent to investors. of Bloomberg. Please contact our reprints and —With assistance from Nathaniel E. Baker permissions group listed above for more information. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 3 Fund FocuS Harbinger to Allow investors to Sell Stakes in Locked-up Funds BY KATHERINE BURTON AND KELLY BIT their money since the global financial tee, and members of the House Science harbinger Capital partners llC, the crisis following Lehman Brothers Hold- Committee have asked Falcone and $6 billion hedge fund run by philip fal- ings Inc.’s September 2008 bankruptcy. LightSquared executives for records cone, told clients who’ve been unable to The fund has a large stake in Falcone’s of contacts with the White House and withdraw all their money for almost three lightsquared inc. wireless telecom- U.S. regulators, citing concerns that the years they can sell their stakes to a third munications venture. Investors in the Obama administration granted preferen- party, according to a letter obtained by flagship Capital Partners fund have been tial treatment to Falcone because he was Bloomberg News. unable to exit two so-called side pockets, a Democratic donor. “We are exploring several options in an or special funds set up to hold illiquid as- One of Harbinger’s side pockets is attempt to accommodate investors,” Fal- sets until they can be sold. made up of private-equity investments cone said in the letter, dated yesterday. LightSquared, based in Reston, Vir- that Falcone didn’t want to liquidate at Harbinger, based in New York, said it ginia, is seeking final approval from the fire-sale prices after markets tumbled. The would put investors in contact with un- Federal Communications Commission investments lost almost 20 percent of their named “potential purchasers” who have to build its high-speed network. It faces value last year. The other is composed of approached the firm. It also will allow scrutiny from members of Congress and assets that have been stuck at Lehman investors to strike their own deals with from makers and users of global position- Brothers since the bank’s collapse. other bidders they may find. Transactions ing system devices, who say its signals Clients who choose not to sell to a third are subject to final approval by Harbin- will disrupt the navigation of boats, party will have to wait until Falcone sells ger, the firm said. airplanes and cars. the investments to get their money back. Clients in Harbinger’s Special Situa- Senator Charles Grassley, the senior steve bruce, a spokesman for Harbin- tions fund haven’t been able to redeem Republican on the Judiciary Commit- ger, declined to comment on the letter. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 4 tHe wire BrieF excLuSiveS MArKet Move ex-Amundi Manager chen Starts Asia Macro Fund kevin Chen, formerly of Amundi Alternative investments, is starting Asia-focused lone pine increases stake in global macro fund Anji Capital management in the first quarter of next year. esprit, boosting shares 12% Chen aims to raise $50 million to $100 million for the New York-based discretionary BY BILLY CHAN fund, which will trade equities, commodities, interest rates and fixed income equally, he esprit holdings ltd., the largest said in a telephone interview. He is currently fundraising in the U.S., Asia and Europe. Hong Kong-listed clothing retailer, Chen was previously co-head of alternative portfolio manage- rose to a three-week high in trading in ment and senior portfolio manager at Amundi AI, the merged the city after lone pine Capital llC asset management entities of Credit Agricole sA and societe increased its stake to become the Generale sA. Before that, he was director of asset allocation at second-biggest shareholder. morgan stanley and a consultant for Swiss Organization for Fa- Esprit climbed 12 percent to HK$11 cilitating Investments, a joint initiative between the Swiss State at the 4 p.m. close in Hong Kong Secretariat for Economic Affairs and kpmG llp. He began his trading, the stock’s highest level since career at China Development Bank’s international finance and Sept. 16. Lone Pine Capital bought investment banking departments. 38.9 million shares at an average price Chen is working with a team of eight people, some of whom of HK$9.50 each on Oct. 4, a disclo- worked with him at Morgan Stanley, he said. sure filing to the Hong Kong stock Kevin Chen Jia peng, credit analyst at ACM, was most recently a director exchange showed. in the fixed income capital markets group at ubs AG. Before The purchase by the Greenwich, that she worked for the deutsche bank AG-backed venture capital firm China eLabs. Connecticut-based hedge fund helped —Kelly Bit trim a decline by Esprit since the ap- parel company said Sept. 15 full-year ex-credit Suisse exec, Level Global PM Start Fund profit fell 98 percent. Revenue from Europe, where Esprit makes most of Zvi Gillon and Ga’ash soffer started New York-based fixed income relative value its sales, declined for a third year amid hedge fund rion Capital llC with $25 million. the region’s debt crisis and intensified The fund will invest primarily in commercial and residential mortgage backed securities, competition. collateralized loan obligations and other credit instruments, Gillon and Soffer said in a “The stake increase by the hedge telephone interview. fund is certainly a factor driving the Gillon was most recently North American head of strategic valuation at Credit suisse share price,” kenny tang, an analyst AG. Before that he was North American head of credit hybrids at Jpmorgan Chase & Co. at Amtd financial planning ltd., He also ran the ABS exotics desk at morgan stanley. Before that, he was a structured said by phone today. “It may spur the credit trader at Merrill Lynch & Co. Inc. idea that further purchases could be Soffer was most recently a portfolio manager running approximately $100 million at on the way.” level Global investors lp. Before that he was a structured credit proprietary trader at Lone Pine’s stake in the retailer in- ubs AG and a credit trader at iii Associates/Avm lp. creased to 6.23 percent from 3.22 per- The fund charges a 2 percent management fee and 20 percent performance fee. The cent after the transaction, according to minimum initial investment is $1 million. There is a one-year soft lockup and 5 percent the filing. The fund’s holding trails that early withdrawal fee. Liquidity is quarterly with 45 days’ notice. Cantor fitzgerald lp is of state street Corp., which owns 6.4 the firm’s prime broker. percent, Bloomberg data shows. —Kelly Bit Esprit has slumped 40 percent from its Sept. 14 closing price. Net income for the year ended June was also redeMPtionS eroded by costs to close stores and sell Esprit’s North American opera- Paulson clients Said to Pull Less than 10% From two Funds tions, the company said on Sept. 15. John paulson, having the worst year of his career, has received less than 10 percent To turn the company around, Chief in redemption requests for his Recovery and Credit Opportunities funds for year’s end, Executive Officer ronald van der vis according to two people familiar with the firm. plans to more than double sales in Withdrawal orders for those two funds, which together managed about $15 billion as of China, in four years. In the year ended July 31, were due at the end of September and may give some indication of what total June, it had HK$2.68 billion in revenue redemptions could be across all of Paulson’s funds, the worst-performing of which has from China, Esprit’s fastest-growing tumbled 47 percent this year. Investors in the rest of the funds, including his flagship Ad- market. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 5 the wire vantage Plus, have until the end of October to put in withdrawal notices. Some long time clients said they are staying put because the 55-year-old manager reSeArcH round-uP made $15 billion in 2007 betting on a tumble in subprime mortgages. “We’re going to give Paulson the benefit of the doubt,” said trip kuehne, founder of The Volcker Rule will take effect on July double eagle Capital management lp, a Dallas-based firm that has invested with Paul- 21, 2012, according to a davispolk sum- son since 2005. “I believe in him and his firm and don’t plan to pull my money.” mary of a draft of the rule that was leaked While investors who have been in the Advantage Plus fund since its 2005 inception are to the American Banker: still up 268 percent over the life of the fund, clients who came in at the beginning of 2008 http://www.davispolk.com/files/ have made 4.3 percent, according to Bloomberg calculations. Publication/5245cae5-379f-4237- Armel leslie, a spokesman for Paulson, declined to comment on redemptions or per- 9fd7-b8f37da06a0d/Presentation/ formance. PublicationAttachment/0fb0c566-582e- Every big dive in U.S. equities in recent weeks, especially in stocks such as Citigroup 4f47-9eba-00af73daef45/100711_Davis. Polk.Volcker.Draft.Funds.pdf inc., transocean ltd. and Capital one financial Corp. that count among Paulson’s largest holdings, has caused speculation that the New York-based firm is selling shares to A hedge fund can outsource “virtually meet redemptions. its entire infrastructure,” according to Paulson and his employees account for about half of the firm’s $30 billion in assets, “A Guide to Technology Outsourcing for according to the two people. Redemption periods for outside investors are staggered, and Hedge Funds,” a “guidebook” devel- if every client eligible to pull money from Paulson funds at year’s end did so, redemptions oped by bny mellon’s Pershing Prime would be about $6 billion, or roughly 20 percent of total assets, according to Bloomberg Services group in partnership with calculations. ezeCastle integration: On average, gross redemptions for Paulson’s funds at the end of any given year have http://www.eci.com/pdf/A_guide_to_ averaged about 10 percent, according to two people familiar with the firm, who asked not Technology_outsourcing_for_Hedge_ Funds_2011.pdf to be identified because the information is private. At the end of 2008, when some hedge funds were limiting withdrawals, Paulson investors pulled 26 percent of assets, the people Hedge funds gained about $6.1 billion said. A net $10 billion came out of the firm at that time, they said. from investors in August, according to Paulson, who started his hedge fund in 1994, has been betting on a U.S. recovery be- trimtabs’s “Hedge Fund Flow Report.” fore the end of next year. The inflow followed $9.3 billion worth of His Recovery fund, which is designed to make money as the economy improves, has redemptions in July, the study said. Indus- tumbled 31 percent this year and the firm’s Credit Opportunities fund, which invests in try assets, which include performance, distressed debt, has fallen 18 percent, according to three investors who asked not to be decreased to $1.79 trillion in August from $1.85 trillion in July, TrimTabs found: named because the fund is private. His oldest fund, Paulson Partners, which bets on the shares of merging companies, is http://www.barclayhedge.com/research/ down 10 percent, the investors said. hedge-fund-flow-report/hedge-fund-flow- report.html Paulson’s Advantage and Advantage Plus funds, which wager on distressed companies and companies going through corporate events including restructurings, have fallen 33 Industry observers expect investors to percent and 47 percent respectively this year through September, according to investors. begin favoring smaller managers “soon,” Those two funds accounted for $15.7 billion in assets as of July. according to the fourth annual opal- —Katherine Burton and Saijel Kishan esque New York Roundtable: http://www.opalesque.com/files/opal- esque_2011_New_York_Roundtable.pdf Longacre to close Some Funds After redemption requests woodfield fund Administration llC published “10 Questions to Ask” for longacre fund management llC, the hedge-fund manager partly owned by a Gold- managers when choosing a fund admin- man sachs Group inc. unit, said it will shut some of its funds after investors asked for istrator: their money back. http://www.woodfieldllc.com/images/ The New York-based firm will return capital at the end of the year, Jeremy Garber, Woodfield_Choosing_Fund_Administra- chief operating officer, said in an e-mailed statement today. The firm continues to manage tor-10_Questions_to_Ask_reprint_9-11.pdf some products, he said. “Given these requests, we believe it is the best course of action to begin the process of Applying a model of systematic overlay an orderly wind down of these specific Longacre Funds,” Garber said. on the Global HFRI index can improve Longacre, which focuses on distressed and leveraged credit investing, was started in the benchmark portoliio and reduce 1998 by former Bear Stearns & Co. executives John brecker, vladimir Jelisavcic and volatility, according to a paper written by Guillaume monarcha at orion finan- steven weissman, according to the hedge fund’s website. cial partners: Goldman’s Petershill Fund Offshore LP bought a minority stake in the fund in June http://www.next-finance.net/IMg/pdf/ 2008, according to the website. Longacre said in December that it planned to close its Quant_Note__overlays.pdf London office. —Katherine Burton and Saijel Kishan 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 6 MArKet cALLS ‘tiger cub’ Kelusa Looks to buy certain chinese Stocks MArKet cALLS, Kelusa Capital China, a Singapore-based fund backed indirectly by Julian robertson, is looking to buy shares in Chinese companies that are at all-time low valuations such reviSited as container shipping firms, ports and exporters, according to kenton leo, the founding partner of the fund. eclectica Asset management llp “These companies are being hurt by a slowdown in China exports, but borderline bank- founder hugh hendry was buy- ing credit-default swaps on bonds ruptcy is being put into these valuations,” Leo said. “There will be an impact, but this entire of Japanese companies including sector is not going to go bankrupt.” nippon steel Corp. (bloomberg brief The long/short fund will initially focus on preserving capital and subsequently invest hedge funds, oct. 5, 2010). when the market panic subsides over the next 18 to 24 months, Leo said. – Credit-default swaps for five year robert mcCreary, the founder of kelusa Capital Group, was responsible for Asian in- protection of Nippon Steel senior debt vestments at Tiger from 1991 to 1995 and is an adviser to Kelusa Capital China. McCrea- were trading around 51.25 when Hen- ry was previously a founding partner of banyan fund management, which he closed in dry made his comments. They dropped to a low of 48.47 on Nov. 22 and have 2004 before setting up Kelusa. Leo had worked at Banyan in New York as an analyst. risen since, reaching a 52-week high of —Netty Ismail 140 last week. omega Advisors inc. founder leon GLc chief economist Sees u.S. economy ‘Slowly’ improving Cooperman predicted the stock price of mortgage guarantor pmi The U.S. economy is coming out of a period where “growth has slowed almost to a crawl Group inc. would rebound after and is just slightly picking up,” according to steven bell, chief economist at GlC ltd. posting 12 straight quarterly losses. “There are plenty of positives out there in my judgment,” Bell said in an interview with (bloomberg brief hedge funds, oct. ken prewitt on Bloomberg Radio. He cited record low mortgage rates, businesses flush 12, 2010). with cash and relatively healthy financial institutions. – The stock was trading around $3.89 per share when Cooperman disclosed “After this period of softness it may be that things are slowly – and I emphasize the word a 5.3 percent stake in the company slowly -- beginning to improve in the U.S. economy,” Bell said. He said fourth quarter GDP and immediately rose 6 percent on the growth would be “maybe in the 2 to 2.50 percent range” with “something of a better growth news. It dropped below $3 per share picture, gradually.” in late January and continued to fall, —Nathaniel E. Baker to a low of 18 cents per share on Aug. 23. This week it was trading around 25 cents per share. Hermes’s Hemming Sees Biggest rebound in Gold, Grains michael burry said he was investing in small technology companies and Corn, wheat and gold will beat other raw materials this quarter as crop yields drop and gold, among others. (bloomberg Europe’s debt crisis stokes demand for bullion, said david hemming, who advises on brief hedge funds, sept. 7, 2010). allocations in the $130 million DB Platinum V Hermes Absolute Return Commodity Fund, – The S&P SmallCap Information which made 12 percent in the first eight months. Technology Index was around 190 Corn may rally 19 percent to $7.25 a bushel, wheat may climb 21 percent to $7.50 a when Burry made his comments bushel and gold may gain 12 percent to $1,850 an ounce by December, said the London- to Bloomberg’s Jon Erlichman. The based fund manager for hermes investment management ltd. index rose to 251.93 by year-end and reached a 52-week high of 282.23 “The biggest potential is the grains,” said Hemming, 30. Gold is “a good hedge on May 10. It dropped after July 7 against any run in the European sovereign debt and banks, and any macro-driven and was around 215 last week. Gold, routs in the U.S.” trading around $1250 per troy ounce —Chanyaporn Chanjaroen and Tony Dreibus when Burry made his statements, rose by more than 50 percent to a high of $1900 on Sept. 5 before dropping to around $1670 this week. european Problems ‘will increase’: tF Market’s tchir phoenix investment Adviser said The compromise between Finland and Europe on securing collateral for Greek bonds bonds of lower-rated companies is a “political fabrication” that will do nothing to improve the fiscal situation in Europe, ac- were undervalued. (bloomberg brief cording to peter tchir, founder of tf market Advisors in New York. hedge funds, sept. 28, 2010). “From the details that have been released so far, it is clear that the ‘solution’ is a com- – The Barclays Capital High Yield Very plex set of rules so that Finland can say they got collateral and the other countries can Liquid Bond Index was around 39.70 say that they didn’t really give up much,” Tchir said by e-mail. at the time and rose to a high of 41.25 on Nov. 4. It traded in a range of $39 to “Until Europe is willing to address the reality of the situation and take some simple but $41 until June and dropped to a low of painful steps rather than complex, unworkable ones that sound good but do nothing, the 35.34 last week. problems will increase,” he added. —Kati Pohjanpalo 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 7 13F ForenSicS: coMMunitY HeALtH SYSteMS inc. Hedge funds were net buyers of Community health systems Community Health has slumped the most among 38 peers in the inc. in the second quarter, adding 3.1 million shares in aggregate S&P MidCap 400 Index this year. The company faces a federal according to Bloomberg data. sAC Capital management llC investigation spurred by an April lawsuit by Tenet, which accused was the biggest buyer of the hospital operator’s stock, adding 3.3 the company of overcharging Medicare at least $280 million. Tenet million shares to its position to become the company’s fifth-largest filed the lawsuit to help block Community Health’s unsolicited institutional shareholder and second-biggest hedge fund investor takeover offer. Regulators probably won’t finish the probe until behind tpG-Axon management. sometime next year, said Art henderson, an analyst at Jefferies Calls to buy shares of the Franklin, Tennessee-based company & Co in Nashville, Tennessee. outnumber puts to sell by more than 5-to-1, and last month the ra- Community Health puts priced 10 percent below the stock price tio soared to 9.5, the highest since March 2006, according to data cost 1.09 times more than calls to buy the shares, according to compiled by Bloomberg. Community Health’s rivals have lower data compiled by Bloomberg. That’s near the six-month low of 1.06 call-to-put ratios: For tenet healthcare Corp, the third-largest set on Sept. 26. The options with the biggest open interest are De- U.S. hospital operator, the figure is 1.87-to-1, down from 3.83 in cember $29 calls, priced 76 percent above the stock, and Decem- March. At hCA holdings inc., the nation’s biggest hospital chain, ber $34 calls. The company’s stock closed at $16.49 on Friday. it’s 1.59. —Nathaniel Baker, Pat Wechsler, Jeff Kearns and Rita Nazareth largest hedge fund shareholders as of June 30 vALue on vALue on LAteSt cHAnGe Percent PercentAGe oF Fund SHAreS HeLd June 30 oct. 6 (SHAreS) controLLed PortFoLio tPG-axon management 4,465,000 115 74 694,500 4.8 3.9 saC Capital management 4,097,046 105 68 3,303,129 4.4 0.7 d.e. shaw & Co. 2,330,871 60 38 1,380,144 2.5 0.3 theleme Partners 2,274,800 58 38 1,118,800 2.4 8.0 Bridgewater associates 958,497 25 16 701,287 1.0 0.3 sigma Capital management 908,500 23 15 813,500 1.0 1.1 westchester Capital management 750,000 19 12 150,000 0.8 0.5 renaissance technologies 430,000 11 7 239,560 0.5 0.0 davison Kempner Capital management 340,181 9 6 190,350 0.4 0.4 saBa Capital management 333,537 9 6 333,537 0.4 3.0 * $millions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 8 reGuLAtorY/coMPLiAnce High-Frequency trades Said to Be topic at regulator confab rajaratnam may Get quarter mary schapiro, the chairwoman of the U.S. Securities and Exchange Commission, and Century prison term regulators from the U.S., Europe and Asia will meet in London to discuss high-frequency trading, said two people with knowledge of the discussions. BY BOB VAN VORIS AND PATRICIA HURTADO The summit at the U.K. Financial Services Authority on Oct. 14 will also include Gary Galleon Group llC’s raj raja- Gensler, chairman of the Commodities and Futures Trading Commission, and steven ratnam faces a federal judge this maijoor, chairman of the European Securities and Markets Authority, according to the week who will weigh wildly divergent people. Officials from Japan, Brazil, Italy, Spain and Canada will also attend the meetings, portraits of the disgraced hedge fund which will look at regulatory issues other than high-frequency trading. manager while interpreting guidelines The European Union is planning to impose limits on high-frequency trading firms to that may call for one of the longest in- prevent a glut of trades from “overloading the systems of trading venues,” generating sider trading sentences in U.S. history. “erroneous orders” or “otherwise malfunctioning” in a way that may create a disorderly Prosecutors paint Rajaratnam as a market, according to draft version of the measures scheduled to be formally proposed “serial insider trader” who corrupted later this month. friends and business associates to il- High-frequency traders also face a proposed tax on financial transactions that could cut legally make profits or avoid losses to- the trading practice by as much as 90 percent “in some market segments,” Manfred Berg- taling $72 million. Defense lawyers say mann, a European Commission official, said in a speech in Oxford, England, last week. Rajaratnam is a generous man who —Ben Moshinsky committed victimless crimes. A prison stretch would kill him, they claim. U.S. District Judge richard holwell in Manhattan, who will sentence Raja- volcker rule Might Ban Fixed-income ‘Flow’ trading ratnam Oct. 13, will consult nonbinding sentencing guidelines that sometimes A proposal for implementing the Volcker rule may prohibit fixed-income trading desks recommend longer terms for white- from engaging in so-called flow trading, in which traders buy or sell bonds to prepare for collar criminals than violent offenders. customer demand, according to brad hintz, an analyst at sanford C. bernstein & Co. “The sentence called for by the A leaked draft of the guideline indicates that market-makers would be prevented from guidelines is likely to be excessive,” taking any positions in “expectation of future price appreciation,” Hintz wrote yesterday in said barry boss, a partner in the a note to investors. “Thus flow trading may be prohibited.” Such a move would cut fixed- Washington office of Cozen o’Connor income revenue by 25 percent and reduce profit margins by 18 percent, Hintz estimated. and co-chairman of the American Bar Goldman sachs Group inc. and morgan stanley would be the most negatively Association’s Criminal Justice Section affected if the rules were adopted because they are most dependent on fixed-income Sentencing Committee. revenue, Hintz wrote. Rajaratnam, 54, was convicted in The Volcker rule draft, which was leaked last week, would be more damaging to fixed- May of 14 counts of securities fraud income trading units than to equities businesses, which make a larger portion of their and conspiracy. money from client commissions, Hintz wrote. Fixed-income traders have become more The longest insider-trading sentence reliant on reaping revenue from price moves in the market because the profit margins before Galleon was 10 years, given from buying and selling to clients, known as the bid-offer spread, have shrunk in recent to former Credit suisse Group AG decades, Hintz wrote. —Christine Harper banker hafiz muhammad Zubair naseem, who was convicted in 2008 of leading a $7.8 million scheme. Since then, former Galleon trader Zvi Goffer Brazil Starts insider-trading Probe related to earnings was also sentenced to a 10-year term. Craig drimal, another ex-Galleon Brazil is stepping up efforts to fight insider trading related to earnings releases after trader, was sentenced to 5 1/2 years. identifying suspicious patterns, chief securities regulator maria helena santana said. danielle Chiesi, a former analyst at “We’re starting a new line of investigation that focuses on earnings releases,” said San- new Castle funds llC, got 2 1/2 tana, president of the Brazilian securities commission, or CVM, in an interview today at years for passing tips to Rajaratnam Bloomberg’s office in Sao Paulo. “Depending on what we get, there could be sanctions.” and others. Both pleaded guilty. The securities regulator is developing a new system to monitor markets and detect trad- Boss said the lesser terms given ing patterns on the days prior to earnings releases, Santana said. underlings may not help. She declined to comment on the number or names of the companies and investors be- “I would be very surprised if Ra- ing investigated. jaratnam doesn’t get more than the The use of non-public information to trade securities is a crime in Brazil and penal- individuals who are less culpable,” ties range from one to five years in prison and a fine of as many as three times the he said. illegal profit. —Felipe Frisch 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 9 over tHe HedGe ■ Citadel llC Founder ken Griffin and ■ barclays Capital Group hosts its 20-year sentences for first-degree man- his wife Anne Dias Griffin attended the second annual Hedge Fund Symposium slaughter and home invasion, FINalterna- Whitney Museum of American Art’s fall at the Grand Hyatt in New York starting to- tives reported. gala on Oct. 5. The gala, which honored night, according to an email from the bank —Melissa Karsh New Yorker magazine artist Calvin Tom- that was obtained by Bloomberg. The kins, took place in a former bus depot invitation-only event features elliott man- ■ The shortlist for the European Fund along the Hudson River in New York. agement Corp. Founder paul singer, of Hedge Funds Awards 2011 includes —Amanda gordon max stone and Julius Gaudio of d.e. man investments, Amundi Alterna- shaw & Co., york Capital management tive investments and new Alpha Asset ■ John paulson is among New York City lp’s Jamie dinan and tim walsh from management, according to Hedge Funds residents expected to receive a visit from the New Jersey Division of Investments. Review, which organizes the event next the “Occupy Wall Street” movement today Texas State Teachers Association, Boeing month. The 10th anniversary of the or tomorrow, according to Crain’s New Co. and the World Bank are expected to awards, taking place Nov. 23, “aims to York Business. The group is planning a send investment staff to the event, which recognize the qualitative attributes of “Millionaire’s March” that will visit homes concludes Oct. 13. Interested parties may the funds as well as the best-performing of some of the city’s wealthiest residents, email [email protected] funds,” Hedge Funds Review said. The Paulson among them, Crain’s website for more information. judging panel includes Amy bensted, said. —Nathaniel E. Baker manager of hedge funds at preqin, skybridge Capital Founder Anthony Andrew rodger, executive director of scaramucci has disagreed with the ■ The landscaper who murdered his stonehage, simon fox, principal at protests, according to the New York Post, daughter on paloma partners’ founder mercer, and tushar patel, managing di- which quoted him saying the movement donald sussman’s Greenwich, Conn., rector and investment manager at hedge was “a transparent joke, a hoax brought estate was sentenced to 40 years in fund investment management. Hedge on with tired ideas to slouch people to prison, according to FINalternatives. Funds Review editor margie lindsay is mediocrity.” Adam Dobrzanski pleaded guilty in May the chairman. —Nathaniel E. Baker and was sentenced to two consecutive —Melissa Karsh Ackman Greets, entertains at Armory Gala BY AMANDA GORDON At the Park Avenue Armory gala, you could walk off dinner just by circulating between courses. That’s what bill Ackman, chief executive of pershing square Capital lp, did last week in the armory’s 55,000-square-foot hall, where 520 guests, including Iac/InterActiveCorp.’s Barry Diller and musician and artist David Byrne, had assembled. Ackman, chairman of the gala with his wife, Karen, and a Park Avenue Armory board member, greeted employees, friends and colleagues as they tucked into their lamb navarin. Ackman also had a turn on stage, before Nico Muhly, Philip Glass and the Brooklyn Youth Chorus performed. “A good friend of mine was just telling me that the last time he Adam Flatto, Georgetown Co.; Ackman; Jonathan Gray, Blackstone Group. was at the Armory was for Schwarzman’s birthday party,” Ackman Photographer: Amanda Gordon/Bloomberg said, referring to Blackstone Group CEO Steve Schwarzman’s 60th birthday party in 2007. “We’ve come a long way.” rate donors. Citi Private Bank will be supporting programming at Ackman said he has been a particular supporter of the Ar- the Armory in 2012 and 2013, the bank’s CEO in North America, mory’s educational programs for underprivileged children. Peter Charrington, said in an interview. “Kids love coming here. It’s like a Harry Potter palace to them,” “We’re excited to bring clients here,” said Charrington. He Ackman said. plans to invite them to performances and private dinners in the The Park Avenue Armory has gone from hosting art fairs and Armory’s restored period rooms. birthday parties to mounting art exhibitions and accommodat- The gala raised $1.26 million, said the Armory’s president and ing a replica of the Royal Shakespeare Company’s theater in executive producer, Rebecca Robertson. Stratford-Upon-Avon for six weeks of performances. Amanda gordon is a writer and photographer for Muse, the arts and leisure It has also recruited board members like Ackman and corpo- section of Bloomberg News. Any opinions expressed are her own. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 10.11.11 hEdgE Funds | Bloomberg Brief 10 PerForMAnce SnAPSHot: LonG/SHort equitY FundS A look at some of the best-performing long/short equity hedge funds that report to Bloomberg data. Only funds with at least $50 million under management that have reported performance through Aug. 31 are included. For questions please contact Anibal Arrascue at [email protected] by year-to-date returns FirM Fund MAnAGer incePtion dAte SHArPe rAtio return % dorsal Capital management llC dorsal Capital Partners lP ryan Frick 9/1/2009 1.66 34.86 Criterion Capital management llC Criterion Horizon offshore Christopher H lord 7/1/2006 4.21 21.37 aker asset management asa aam absolute return Fund - a Usd Harld James otterhaug 12/1/2006 2.27 12.82 Criterion Capital management llC Criterion Capital Partners ltd Christopher H lord 5/1/2003 3.79 12.53 Bohong tianjin Fund mangement Co ltd Bohong PiPe enhanced index-i liu Hong 11/24/2010 N/a 11.87 mQ Portfolio management ltd macquarie asian alpha Fund-a andrew alexander 7/31/2006 5.43 11.73 shannon river Global management llC doonbeg Fund lP spencer waxman 10/1/2007 2.67 11.06 Cazenove Capital management ltd Cazenove UK dynamic abs ret Paul marriage 5/31/2005 2.43 11.00 Pinpoint asset management ltd Pinpoint China Fund - a Qiang wang 6/3/2005 2.03 10.68 act ii management lP act ii Partners lP dennis H. leibowitz 3/8/2002 3.08 10.67 by five-year Annualized returns FirM Fund MAnAGer incePtion dAte SHArPe rAtio return % Greenwoods asset management ltd Golden China Fund - Unrestricted George Jiang 6/30/2004 1.05 28.38 Pinpoint asset management ltd Pinpoint China Fund - a Qiang wang 6/3/2005 1.26 27.16 Brightline Capital management llC Brightline Capital Partners Nick Khera 6/30/2005 0.90 23.32 archon Capital management llC strategos Fund lP Constantinos Christofilis 7/1/2004 1.15 22.46 odey asset management llP oei mac inc - Usd Crispin w odey 2/7/1992 0.79 19.51 Value Partners ltd Value Partners Hedge Fund ltd Chow eric yik-Cheung 10/29/2004 1.09 19.03 sandler Capital management sandler Plus domestic Fund lP andrew m sandler 9/30/2005 1.49 18.55 sprott asset management lP sprott offshore Fund ltd - a eric s sprott 12/31/2001 0.74 17.90 Broadfin Capital llC Broadfin-Healthcare Fund lP Kevin Kotler 9/30/2005 1.28 17.51 act ii management lP aCt ii Partners lP dennis H leibowitz 3/8/2002 1.51 16.48 For Sharpe ratio calculation methodology type FldS Sharpe <go> on BloomBerg. “riSk Free rateS” idoc 2047613 <go> 1 2 3 4 5 6 7 8 9 10 11 12 13 14