Cohen’s Comeback Revisited

In a follow-up to an article it published a few days earlier, Bloomberg recently reported that hedge fund manager Steven Cohen “is preparing to raise as much as $10 billion from outside investors in 2018 for a new fund.” The move, the article says, would represent an “extraordinary turnaround” for Cohen, particularly given that his former firm, SAC, got bad press four years ago on its guilty plea to insider trading for which it paid a “record $1.8 billion penalty.” The article suggests that Cohen’s efforts could be an attempt to save face with investors, but argues that if he […]

Cohen Preparing for a Comeback

Billionaire Steve Cohen, the former head of the firm SAC Capital Advisors—which pleaded guilty to securities fraud in 2013 and agreed to pay a record $1.8 billion fine—is considering starting a new hedge fund, according to a recent Bloomberg article. While Cohen wasn’t charged with wrongdoing in the case, he was barred from managing outside capital until January 1, 2018 and was required to convert his shop to a family office. According to the article, his “returns are just beginning to rebound after 18 months of barely making money at his family office, Point72 Asset Management. He’s now up about […]

Buffett Wins his 10-Year, Million-Dollar Wager

Warren Buffett is the winner in the bet he made with finance professionals back in 2007 that, over the ten years between January 1, 2008 and December 31, 2017, the S&P 500 would outperform a portfolio of funds of hedge funds (when performance is measured on a basis net of fees, costs, and all expenses). This according to an article in this week’s AEI. Ted Seides, co-manager of Protégé Partners, was the only fund manager to accept Buffett’s challenge. The following results are outlined in Berkshire’s 2016 letter to shareholders: “Buffett’s index investment bet is so far ahead,” the article states, […]

Paul Tudor Jones See Struggles in Main Fund

The billionaire fund manager who “helped give rise to the hedge fund industry saw clients pull about 15% of their assets from his main fund in the second quarter,” according to a recent Bloomberg article. According to Hedge Fund Research Inc., the article says, macro hedge funds “have posted their worst first half since 2013, losing 0.7%.” Jones’ main BVI Global Fund, it reports, is down 1.9% this year (through July 21). Last month, the billionaire sold the firm’s 43-acre headquarter property in Greenwich, Connecticut and plans to move to a location more accessible to New York City (where the […]

Hedge Funds Perform When Managers are Vested and Inflows are Limited

Research from NYU and Columbia University shows that hedge fund managers that invest in their own funds deliver the best results, according to a recent article in Institutional Investor. In a paper distributed this month, the researchers report that “insider investment aligns incentives between managers and investors and induces managers to limit the size of their fund, resulting in higher alphas.” The study also shows that when funds raise outside capital, managers are “compensated primarily from managerial fees and leave little value to outside investors.” Funds with no outside capital, the study shows, earned higher excess annual returns (to the […]

Hedge Fund Coatue Invests in Data Science

Hedge funds continue their push into “big data” analysis to land trading opportunities, and Coatue Management LLC is no exception, according to a recent article in The Wall Street Journal. The fund recently announced a $27 million funding round for a company called Domino Data Lab Inc., a San Francisco startup founded by Bridgewater Associates LP alumni. Coatue joins other investors including Bloomberg Beta, Zetta Venture Partners and Sequoia Capital. “Domino’s software allows data scientists to run experiments and analyze data in a collaborative program,” the article explains, “which helps analysts at Coatue discover new trends and hand them to […]

Yale’s Actively Managed Fund Performance Waning

The majority of the Yale University endowment fund is invested with active managers but, if you compare its returns to low-cost active strategies rather than to passive indices, “Yale’s active managers don’t look so special,” writes Bloomberg’s Nir Kaissar. In its recently released 2016 annual report, the article says the esteemed university’s endowment rebutted “fee bashers” by arguing, “The important metric is net returns, not gross fees.” Kaissar points out, however, that Yale’s attempt to substantiate high fees in the name of net returns is no longer valid.  While low-cost “smart-beta” funds haven’t been around long enough to allow a […]

Tiger Cubs are Licking Their Wounds

A generation of hedge-fund firms started by protégés Tiger Global Management’s Julian Robertson, known as “Tiger Cubs”, are “among of wave of stock hedge funds that fared poorly in 2016,” says a Wall Street Journal article from earlier this month. Last year, the article states, Tiger suffered losses of about $900 million (a 15.3% loss) and, according to Morgan Stanley data, only one-fifth of the 8.5% gained by the MSCI AC World index last year (excluding December) came from equity hedge funds, a relative return that was “the second worst since the 2008 financial crisis.” Tiger Cubs, considered “bottom-up” stock […]

Bridgewater Has Strong Showing in 2016

Ray Dalio’s Bridgewater Associates earned almost  $5 billion for its clients last year according to a report by hedge-fund investor LCH Investments NV, versus losses suffered by rivals George Soros and John Paulson. This according to a recent Bloomberg article. In fact, the article points out, Bridgewater was the “most lucrative, in absolute terms, of the top-20 hedge funds ranked, and bucked the trend of a generally disappointing year for the industry.” In the report, LCH chairman Rick Sopher writes, “Even the managers with the greatest long-term records did not perform strongly and their results were no better than the […]

Pushing the Envelope Has Paid Off for Select Hedge Funds

On the whole, the past year hasn’t been great for hedge funds, but those who “ventured far afield” seemed to do better, according to a recent article in The Wall Street Journal. Specifically, the article says that some of the biggest profits materialized in “areas less frequently traded” including: Russia and Central Asia: One of the world’s biggest Russia-focused hedge fund firms, Moscow-based Prosperity Capital Management (approximately $3.3 billion in assets), reported a 57% gain in its flagship fund (as of December 22, 2016). The article quotes their Chief Investment Advisor, Alexander Branis, who said he has been “encouraged by […]

Hedge Fund Managers Search for Alpha in Big Data

If the world’s annual data generation was loaded into iPad Air tablets, says a recent Financial Times article, “the pile would reach from the earth to the moon more than six times over.” Technology companies can harvest information from consumer emails and online receipts which can then be “scraped, aggregated and sold to investment firms looking for tradable signals, or to use the jargon—’market-beating alpha’.” However, the article explains, “The investment industry’s push into alternative data raises some potentially awkward questions.” Even though the data is supposedly “scrubbed” of any personal consumer information, the standards “are far from uniform” which […]

Big Data Doesn’t Automatically Mean Big Investment Returns

The quant craze in investing doesn’t come without its own set of challenges, says a recent Bloomberg article. As hedge funds delve headlong into the data world to hoist up returns and stay competitive, some may lack the prowess necessary to harvest relevant and accurate numbers, says Matei Zatreanu, who led the charge at $19 billion hedge fund King Street Capital Management. “There are those who realize their industry is changing and their fund isn’t going to exist if they don’t adapt,” he says, adding, “but not many of them know what they are doing, except a few.” The problem […]

Hedge Funds Hungry for Quants

If you’re looking to land a job at a hedge fund, polish up your algorithm building and data mining skills to get to the front of the line. This according to a recent Bloomberg article that explains how hedge funds are hiring quants “like never before in search of an answer to lackluster returns.” King Street Capital Management and Tudor Investment Corp. are among the names anxious to beef up their data analysis and research operations, according to Michael Karp of New York-based recruiting firm Options Group (who has been working in the industry for 25 years). And these jobs […]

GMO: Don’t Bail on Hedge Funds

The fall in rates since the financial crisis has benefited stocks and other long-duration assets while hurting short-duration assets such as hedge funds, says GMO’s Ben Inker. “The characteristics that made hedge funds disappoint,” he says, “may well prove a blessing if discount rates start to rise.” Inker argues that today’s high returns and advanced U.S. equity valuations are not sustainable because they “represent an increase in the present value of an asset without any increase to the cash flows to the asset class.” So while the present values have risen, he says, future values have not. He contends that […]

Investors Looking to Quants for Fund Management Muscle

As hedge fund managers continue to grapple with losing dissatisfied clients, those funds more highly-focused on a computer-driven approach (so-called “quantitative” hedge funds) are standing out, the Financial Times reports. According to FT, the flow of investor funds into the “quant” sector have more than doubled since 2009 (from $408 billion to nearly $880 billion). Several large hedge funds are increasing investments in quant strategies “as they search for new—and potentially more reliable—ways to produce returns.” Tony James, chief operating officer of Blackstone, was quoted as saying, “Frankly, we expect to see assets move from human managers to machine managers.” Paloma […]