Tuesday June 7, 2016
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Sabretooth Capital Co-Founder Kalir Said to Start Fund INSIDE
BY HEMA PARMAR Greenlight Capital lost 1.9 percent in its Erez Kalir, co-founder of Julian Robertson-backed Sabretooth Capital main hedge fund in May. More returns Management, has started a new hedge fund firm. Stansberry Asset Management from funds last month. began trading its multi-asset strategy on April 1 and has $70 million in separately managed accounts, according to a person familiar with the matter. Weiss Multi-Strategy Advisers hires Stansberry, which has between $250 million and $300 million in additional soft Ross Schubak for consumer bets. commitments over the next year, will invest in equities and credit, and bet on merger Distressed debt trader Nate Morse joins Aristeia Capital: Exclusives arbitrage, distressed debt and special situations, the person said. The new hedge fund is backed by several principals from Stansberry Research, a Baltimore-based financial information publisher, who have taken equity stakes, provided RBC Global Asset Management’s seed funding and assisted in capital raising, according to the person. PH&N Absolute Return Fund closed for a Stansberry has three portfolio options, including one that’s more aggressive and second time to outside investors. invests in riskier, more volatile asset classes, according to a Feb. 29 letter to potential Goldman sells stakes in five hedge investors obtained by Bloomberg. Its conservative portfolio focuses on equities that funds for $800 million: Milestones have "proven their resilience," such as health-care company Johnson & Johnson, and will have a higher dividend yield, the letter said. The firm’s portfolios are unlevered, Halcyon Capital Management said to according to the person. It may also offer commingled funds in the future. shut energy-focused hedge fund after the The six-person firm has a bearish outlook on the year, and expects "more serious collapse of oil prices: Closures disruptions" to come following stock market volatility in the beginning of the year, according to the letter. In it, Kalir pointed to risks including artificially high valuation UBS bets on hedge funds as a cure for levels in stocks and bonds, the end of the Federal Reserve’s quantitative easing low sovereign returns: Allocations program and "bad debt problems" across asset classes such as Chinese and European banks. Donald Trump supporters said to court Kalir started event-driven Sabretooth Capital, which was seeded with $65 million from Robert Mercer, co-CEO of Julian Robertson, in 2009 with co-founder Craig Perry. In 2008, Kalir and Perry worked Renaissance Technologies: Over the as consultants advising Robertson on how to manage his personal portfolio, the person Hedge said. Sabretooth shut down in May 2012 following disagreements between the two co- founders. Prior to Sabretooth, Kalir worked at Eton Park Capital Management, the The U.S. repaid $6 million to hedge fund firm run by Eric Mindich, from 2004 to 2008 as an analyst in its special Diamondback Capital in insider-trading situations group. Kalir declined to comment. turn: Regulatory/Compliance
FCERA Seeks to Raise Allocation With Fund of One
The Fresno County Employees’ Retirement The new fund would have low correlation to global equity Association, which manages almost $4 billion in assets, is and fixed-income markets, and would invest in relative value, seeking to more than double its current $144 million hedge event-driven, long-short equity and opportunistic hedge fund fund allocation through a fund in which its the sole investor, strategies, according to an FCERA document dated June 1. according to public documents. FCERA is pursuing the change to get the asset class The GCM Better Futures Fund would manage $320 million exposure they are seeking in a "cost effective and in assets and invest in multiple hedge funds. Grosvenor transparent manner," the document said. Capital Management will be its non-discretionary manager, The fund would focus primarily on absolute return oriented according to Donald Kendig, the California county’s pension investments that will "exploit mispricing and inefficiencies in plan administrator. The current $144 million investment is in global capital markets, while attempting to reduce exposure Grosvenor’s flagship fund of funds, which would be one of to primary market factors (e.g., interest rates and equities) the underlying managers of the new fund of one. The through various hedging techniques," the document said. It pension is planning to invest about $180 million more in would avoid underlying funds that impose lock-ups of more about five underlying managers that Grosvenor will suggest than two years. to FCERA’s board of retirement, Kendig said in an interview. Grosvenor did not respond to requests for comment. Managers will be determined at the board’s June 15 — Hema Parmar meeting, he said.
RETURNS IN BRIEF June 7, 2016 Bloomberg Brief Hedge Funds 2
RETURNS IN BRIEF
A look at hedge fund performance last month. Funds in the table below not mentioned in the accompanying text on this page were reported in other issues of the Brief or in Bloomberg News stories. For questions, e-mail [email protected].
Quad Group’s Multi-Strategy Fund May Returns gained 5 percent last month, bringing returns for the year through May to 10.3 percent, according to an investor letter obtained by Bloomberg. The fund, which trades event-driven, long-short equity, macro, directional and commodity futures strategies, opened to outside investors on June 1, according to a person familiar with the matter, after trading the firm’s proprietary capital since at least 2014. Quad, which manages about $90 million in assets, was founded in 2007. Peter Borish, the firm’s chief strategy officer and a founding partner of Tudor Investment Corp., declined to comment. — Hema Parmar Greenlight Capital, the investment firm led by David Einhorn, lost 1.9 percent in its main hedge fund in May even as stocks climbed. The decline reduced the fund’s return in 2016 to 1.1 Year-to-Date Returns to End-May percent, according to an e-mail sent to clients that was obtained by Bloomberg. The S&P 500 Index, including reinvested dividends, returned 3.6 percent in the first five months of the year. Jonathan Gasthalter, an external spokesman for the New York-based firm, didn’t respond to a request for comment. Greenlight is trying to rebound from a plunge of more than 20 percent in 2015, its worst underperformance since the firm’s inception in 1996. — Simone Foxman Taylor Woods Capital Management, one of the world’s best performing hedge fund firms in 2015, lost 7.3 percent in the first five months of the year as bets on commodities soured, according to a letter to investors seen by Bloomberg. The Taylor Woods Master Fund Ltd., run by George “Beau” Taylor, lost money The fund gained 18.4 percent last year. fund, which managed $16.9 billion at the every month, the longest losing stretch — Nishant Kumar end of April, lost 0.9 percent in April and since 2011, the letter showed. While the Brevan Howard Asset Management almost 2 percent in March, according to a fund profited from its bets on metals in LLP’s main hedge fund lost money in company website. Brevan Howard May, speculation in energy markets May, its third straight monthly decline this focuses on macro-economic trends to bet triggered a 1.2 percent decline for the year, according to two people with on bonds, currencies, equities and period. Officials at the Greenwich, knowledge of the matter. The Brevan commodities. The main hedge fund fell Connecticut-based firm didn’t respond to Howard Master Fund fell 0.3 percent last almost 2 percent in 2015, extending the phone calls and e-mails seeking month, deepening its losses for the year previous year’s 0.8 percent drop, a comment. Taylor, 45, co-founded the to 2.1 percent, said the people. A person familiar with the matter said in fund with Trevor Woods, his former spokesman for the firm, run by billionaire January. colleague from Credit Suisse Group AG’s Alan Howard, declined to comment. The — Nishant Kumar global commodities team. June 7, 2016 Bloomberg Brief Hedge Funds 3
EXCLUSIVES June 7, 2016 Bloomberg Brief Hedge Funds 4
EXCLUSIVES
Weiss Hires Cadian’s managed about $2.3 billion as of year- event-driven funds as the flow of mergers end, according to the filings. and acquisitions declined. The funds fell Schubak to Make Consumer Paul Merchan, senior manager at 3.6 percent last year and dropped 3 Bets Peppercomm, which handles public percent in January before recovering and Ross Schubak, former consumer relations for Weiss, confirmed Schubak’s gaining 1 percent for the year, according sector head at hedge fund Cadian move and declined to comment on the to Hedge Fund Research Inc. Global Capital Management, has joined $1.1 returns. Cadian Capital didn’t return calls M&A activity dropped 11 percent in the billion Weiss Multi-Strategy Advisers for comment. first quarter from a year earlier, according as a portfolio manager. — Hema Parmar to data compiled by Bloomberg. Schubak moved to Weiss in mid-May, Luxor in January reduced its six-person where he will focus on the U.S. Distressed Debt Trader fixed-income team to four people, consumer discretionary sector, after according to a person familiar with the working at the hedge fund from 2008 to Morse Joins Aristeia Capital matter. Luxor managed $8.1 billion 2013. Most recently he spent three years Credit trader Nate Morse has joined including leverage as of Dec. 31, as a money manager at Cadian, he said. hedge fund Aristeia Capital after leaving according to regulatory filings. A Chief Executive Officer George Weiss Luxor Capital in January as event driven spokesman for the firm declined to started the firm, which runs two hedge strategies struggled earlier this year. comment. funds, in 2006. Weiss Multi-Strategy Morse will focus on trading high-yield Morse was previously a managing Partners, the firm’s main fund, gained 0.9 credit for the $2.2 billion fixed-income director of special situations at Jefferies percent in May, bringing returns for the relative value fund in Greenwich, & Co., and prior to that was managing year to 5.2 percent, according to a Connecticut, according the firm’s Chief director of distressed credit trading at person familiar with the matter. Operating Officer Andrew David. Morse Citadel Securities, according to his Cadian Capital, the New York-based had spent more than a year and a half as LinkedIn profile. Before joining Citadel in hedge fund run by former Perry Capital a credit trader at event-driven Luxor 2009, Morse worked at units of Citigroup portfolio manager Eric Bannasch, Capital before leaving six months ago, Inc. and Barclays Bank PLC, according invests in media, technology, consumer according to his LinkedIn profile. to Financial Industry Regulatory Authority and other sectors, according to The start of the year was tumultuous for records. regulatory filings. The firm, which was — Hema Parmar and Laura J. Keller formed in 2007,
MILESTONES June 7, 2016 Bloomberg Brief Hedge Funds 5
MILESTONES
RBC Fund Has Second Close, Raises Over $200 Million RBC Global Asset Management’s "The reopening was not in response to Mamdani said of his market outlook. PH&N Absolute Return Fund closed for a trying to offset redemptions," which have "Between Federal Reserve rate hikes, second time to outside investors on June been minimal, he said. "We had a bunch Brexit and the U.S. elections, there’s so 1 after raising C$270 million ($211 of clients that wanted access to the fund much going on this year and people have million) of new capital, according to and then we saw a credit market that such trigger fingers, and then the asset portfolio manager Hanif Mamdani. was very dislocated, and we put the two class itself has attracted a lot of high- The multistrategy fund, which focuses together." yield tourists that use exchange-traded on Canadian and U.S. credit and event- The Vancouver-based fund, which has funds or other vehicles for exposure, so it driven strategies, reopened in April to returned an annualized 13.5 percent creates the recipe for meaningful selloffs outside investors and now has about since on any unanticipated event," he said. C$1.4 billion ($1.1 billion) in total assets, its inception in 2002, originally hard "Having lots of cash now is not a bad said Mamdani, who is the head of closed in 2011, according to Mamdani, thing in anticipation of these selloffs in alternative investments at RBC Global who leads a team of two analysts — the summer or perhaps in the fall." Asset Management. Justin Jacobsen and Emil Khimji. The Royal Bank of Canada acquired "With the dislocations in the credit fund was up 2.3 percent last month and Phillips, Hager & North Investment markets in December, January and gained 13.7 percent this year through Management, the fund’s original February, we saw that perfect alignment May after declining 2.3 percent in 2015, management firm, in 2008. PH&N has of investment opportunities and a buyer’s he said. C$100 billion in standalone assets, market to put money to work so we "The right strategy now is not to including long-only equities, fixed-income seized," Mamdani said. The original gravitate to the very rich, ultra safe high- and hedge fund assets. RBC Global target was C$200 million, he said. yield names because there will be a Asset Management has more than $350 better opportunity to buy those later this billion in assets. year," — Melissa Karsh
Goldman Sells Stakes in Five Hedge Funds for $800 Million BY NISHANT KUMAR the total money invested before fees, according to a letter to Goldman Sachs Group Inc. is selling minority stakes in five investors obtained by Bloomberg. The investments and the hedge funds to Affiliated Managers Group Inc. for about $800 remaining Petershill funds are housed in Goldman Sachs Asset million. AMG will acquire stakes held by the Petershill Fund I, Management, part of the investment management division run which has holdings in Winton Capital Group Ltd., Capula by Eric Lane and Tim O’Neill. Investment Management LLP, Partner Fund Management Petershill Fund I raised $1 billion in 2007 and invested in nine LP, Mount Lucas Management LP and CapeView Capital firms including Winton Capital and Capula Investment, both LLP, the company said in a statement on Monday. based in London. The Petershill Fund I has generated 15 AMG, which has a collection of boutique managers percent annualized cash yield for its investors, according to the specializing in stocks, hedge funds and private equity, said its letter to investors. A spokesman for Goldman Sachs confirmed assets under management are expected to increase by $55 the contents of the letter. billion to almost $700 billion after the deal. Goldman is selling its “This transaction demonstrates the potential to exit positions to stakes at a 22 percent premium to their net asset value at the strategic asset management buyers, such as AMG, at attractive end of last year. The deal comes as the $2.9 trillion hedge fund valuations,” Petershill said in the letter. “The sale of individual industry faces a growing backlash over lackluster performance interests to a financial buyer or a portfolio-level IPO remain and the fees they charge. alternative monetization routes in the future for the ongoing “The challenges we are seeing in the hedge fund industry Petershill program.” apply to certain funds, strategies and clients,” Sean Healey, AMG said the $800 million for the deal will be “paid in cash at chairman and chief executive officer of AMG said in a telephone closing, funded up to 50 percent in equity.” Separately, AMG interview on Monday. “But we’re still seeing ongoing demand said Monday that it intends to sell 2.5 million shares of its from institutional clients globally, such as sovereign wealth funds common stock. The underwriters will be granted an option to and pension plans.” purchase up 375,000 additional shares. Goldman Sachs felt this was an attractive exit for investors Healey said by phone that talks with Goldman started in March who had been in the fund for almost a decade, according to a when he flew to London and had coffee with Mike Sherwood, co- person with knowledge of the decision. Funds like Petershill tend chief executive of Goldman Sachs’s international group. to hold investments for as long as 10 years and as the bank was Since Petershill I invested in the five firms, their combined considering various ways to return clients’ money it received the assets grew to $55 billion from $18 billion. Goldman Sachs has offer from AMG, the person said. raised $1.5 billion in the Petershill II fund to continue investing in The fund generated a return on investment of about 2.5 times hedge funds, a person said in May.
CLOSURES June 7, 2016 Bloomberg Brief Hedge Funds 6
CLOSURES
Halcyon Capital Said to Shut Energy-Focused Fund FUNDRAISING Halcyon Capital Management, which runs almost $10 billion in assets, has shuttered its energy-focused hedge fund after the collapse of oil prices. The Energy, Power and Infrastructure Capital Fund and its manager, Halcyon Energy Ex-BlueBay Managers Investors, were closed on March 31, according to two people familiar with the matter. Concerns over the ability to raise assets for the fund contributed to the decision, the Said to Raise $2B in Fund people said. At its peak, the fund managed $140 million, one of the people said. Glen Point Capital, an investment Oil prices have plunged more than 50 percent since the downward spiral began in firm started by former BlueBay June 2014, hitting companies highly exposed to commodities. Energy-focused equity Asset Management money funds fell 6.5 percent in 2014 and almost 14 percent last year before rallying about 9 managers Neil Phillips and percent this year through April, according to Hedge Fund Research Inc. Jonathan Fayman, raised almost $2 New York-based Halcyon Capital Management owned a controlling stake in the billion in one of the largest hedge- management company. Scott Tagliarino, managing partner at ASC Advisors, which fund startups in Europe this year, handles communications for Halcyon, declined to comment. according to two people with The fund and management company were run by a three-person team: Chief knowledge of the matter. Investment Officer Jim McGinnis, partner Paul Torgerson and associate Travis The London-based firm started Bartlett, who left in October 2015, according to his LinkedIn profile. trading last year and will stop taking The EPIC fund had its largest net long exposure in the midstream energy sector, money from June 1, the people said. McGinnis told Bloomberg Brief in August 2014, as oil prices began their descent. The fund has returned about 9 "We’re at a point where well-capitalized and well-run midstream providers, such as percent since its start in October, the Targa Resources Corp., Enterprise Products Partners, Energy Transfer Equity and people said. Williams Cos., have a comparatively strong negotiating position with their clientele," Glen Point, which bets on McGinnis said at the time. The fund exited most of its midstream positions by the first macroeconomic trends with a focus half of 2015, said one of the people. From the end of August 2014 through June 2015, on emerging markets, joins a small Targa fell about 35 percent while Energy Transfer rose about 8 percent. The fund was number of hedge funds, including all in cash at the end of the first quarter, one of the people said. Rokos Capital Management and Key — Hema Parmar, with assistance from Simone Foxman Square Group, that have been attracting new money as many peers Pine River to Shut $1.6B Credit Fund After Kuhn Retired are suffering outflows. Hedge fund manager Dan Loeb said in April that Pine River Capital Management is closing its $1.6 billion fixed-income hedge fund the industry is in the first stage of a after Steve Kuhn, one of its co-managers, announced he was stepping away from “washout” after losses at the start of managing money, the firm said in a letter to clients. the year, and Blackstone Group LP The eight-year-old fund will be liquidated and cash will be returned to clients, Chief President Tony James predicted last Executive Officer Brian Taylor, whose firm oversees about $13 billion in assets, said in month that hedge funds may lose 25 the letter. Investors will be able to put money into the firm’s flagship $3.7 billion Pine percent of assets. River Fund without paying an incentive fee until it surpasses the previous peak value of Phillips joined BlueBay, owned by the fixed-income pool, the letter said. Royal Bank of Canada, in 2005 as a The fixed-income fund gained about 1 percent in May, paring this year’s losses to 2.6 money manager. In 2007, he started percent, according to a person with knowledge of the matter. The flagship fund rose managing a macro strategy within the about 2 percent last month, leaving it down 1.3 percent year-to-date, the person said. firm’s multi-strategy fund, moving on Kuhn said in April he’s stepping back from his role as money manager and plans to to manage the firm’s standalone leave the Minnetonka, Minnesota-based firm after eight years to focus on philanthropy. macro hedge fund in 2009. BlueBay Kuhn said at the time that value investors are having a hard time because clients don’t closed the $1.4 billion macro fund always have the patience to stick with them when their trades go against them. The after Phillips and Fayman left in three remaining managers overseeing the fund will remain at Pine River, the letter said. November 2014. In recent years, the fixed-income fund had “become more diversified and multi- A spokesman for Glen Point strategy in nature,” Taylor wrote. “We now believe we can best serve our investors by declined to comment. managing a single flagship multi-strategy fund” rather than simultaneously managing Glen Point has hired 21 people, two, he said. including eight in its investment team, Pine River will also next year spin off its China Fund, which is managed by Dan Li, one of the people said. allowing Li to run his own firm, according to the letter. — Nishant Kumar and Katia Porzecanski Reuters reported the news of the closure earlier Monday. An outside spokesman for Pine River declined to comment. — Katia Porzecanski
ON THE MOVE June 7, 2016 Bloomberg Brief Hedge Funds 7
ON THE MOVE Brevan Howard's Melkman Is Said to Plan Own Fund ALLOCATIONS Ben Melkman, a partner at Brevan Howard Asset Management, left the company to start his own fund, according to a person with knowledge of the matter. Melkman, who joined Brevan Howard in 2009 and is based in Geneva, is planning to UBS Bets on Funds as Cure start the fund in New York in the first quarter of 2017, said the person. He is seeking for Low Sovereign Returns $400 million at the outset and plans to cap assets at $1 billion during the first year, said UBS Group AG is advising its the person. Melkman helped oversee some assets in Brevan Howard’s main fund and wealthiest clients to stick with hedge was the senior trader for the company’s dedicated Argentina fund, which had more than funds even after the $2.9 trillion industry $500 million under management before closing last month. It produced net returns of 18 had its worst start to a year since 2008. percent since opening to outside investors in January 2015. While the days of “double-digit and His new fund will focus on macroeconomic trends and take concentrated, long-term triple-digit returns” for hedge funds are positions. Melkman declined to comment on the new fund, as did a spokesman for over, they still generate enough to satisfy Brevan Howard. David Bonfili, the former chief operating officer at BlackRock Inc.’s yield-hungry clients who face negative Alternative Investors group, is planning to join the firm as COO, said the person. Bonfili interest rates, said Mark Haefele, global also declined to comment. chief investment officer of UBS Wealth Brevan Howard has seen its assets decline from $40 billion in 2013 to less than $20 Management. billion. Investors have asked to pull about $1.4 billion from Brevan Howard’s main hedge “Their performance in the first half fund, two people with knowledge of the matter said in April. hasn't been impressive but they provide — Katia Porzecanski diversification,” he said in an interview with Bloomberg. “They still provide a Crowdsource Quant Network Hires Hudson Bay’s Larkin better risk-reward or different risk-reward than other parts like sovereign bonds.” Quantopian Inc., the five-year-old online platform where coders build and run UBS in April boosted its recommended computerized trading programs, has hired Jonathan Larkin, a former portfolio manager allocation to hedge funds to 20 percent at Hudson Bay Capital, as its chief investment officer. from 18 percent, saying the strategy will Larkin will help pick and allocate money to algorithms written by Quantopian’s 80,000 provide stability from volatile markets. or so users, as the startup seeks to open up its fund to external investors. He was The move comes as a net $15 billion was previously head of U.S. equities at BlueCrest Capital Management and before that pulled from the global hedge-fund held similar positions at Nomura Holdings Inc and Millennium Management LLC. industry in the the first quarter and as With barriers to entry falling in computerized investing, Quantopian provides its users some of world’s largest institutions with tools and software to write automated trading strategies. The Boston-based firm is including MetLife Inc. said they will scale now hoping to connect investors with its member base as an alternative to the traditional back their holdings. shops like D.E. Shaw & Co. and Renaissance Technologies LLC. Developed market bonds, by contrast, “The hedge fund industry is in transition. For most of the traditional and entrenched have rallied as the European Central players, asset flows are tepid, pressure on fees is high, and recent performance has Bank and the Bank of Japan expanded been broadly disappointing,” said Larkin in a e-mailed message. “The traditional model stimulus measures and the U.S. Federal is broken and a new business model is needed. Quantopian is that business model.” Reserve held off raising interest rates. For more than a year, Quantopian has held programming contests, trading venture- The Bloomberg Global Developed backed capital on the winning strategies and sharing those profits with the algorithms’ Sovereign Bond Index has gained 8.3 writers. Larkin’s hire comes as the firm prepares to manage money beyond that from its percent this year, while its yield fell to venture capital backers, taking on external clients to operate more like a traditional 0.67 percent, near a record low. hedge fund, albeit using crowdsourced algorithms. Haefele, who sits on the UBS pension As a part of that push, Quantopian hired Derek Meisner, formerly of RA Capital board, said the bank had also been Management, as its general counsel and chief compliance officer earlier this month. creating so-called endowment-style — Dani Burger portfolios to encourage clients to invest in more private equity and real estate to Winton’s Babbedge Joins Gresham as Chief Scientist “harvest the illiquidity premium.” The bank’s asset-management unit, which Gresham Investment Management hired Thomas Babbedge from Winton Capital oversees 628 billion Swiss francs ($634 Management as chief scientist as the New York-based firm expands in London. billion), has about 16 percent invested in Babbedge started at Gresham on Wednesday and will research and develop alternative assets, including 41 billion systematic futures strategies, with an emphasis on commodities futures, according to francs in hedge funds and 52 billion Scott Kerson, head of systematic strategies at the firm. Those models will be used to francs in real estate. underpin new funds to be launched by Gresham, he said. — Sarah Jones and Jan-Henrik Förster Babbedge spent nine years at Winton as head of investment analytics. Prior to that, he was an extragalactic astrophysicist at Imperial College London. — Jesse Riseborough and Agnieszka de Sousa
MARKET CALLS ITEMS MAY BE SUBMITTED TO [email protected] FOR CONSIDERATION June 7, 2016 Bloomberg Brief Hedge Funds 8
MARKET CALLS ITEMS MAY BE SUBMITTED TO [email protected] FOR CONSIDERATION
David Einhorn’s Greenlight MARKET CALLS, REVISITED BY HEMA PARMAR Shrinks Stake in Consol
Greenlight Capital Inc., the hedge Health-care focused RA Capital Management tends to look for small companies fund run by David Einhorn, sold 7 that have unique technologies to make drugs for various diseases, as well as million shares of Consol Energy Inc., companies that have just one compelling product, according to Peter Kolchinsky, shrinking its position in the coal and portfolio manager at the Boston-based hedge fund. Kolchinsky said in an interview natural gas producer even as the last May that the firm would invest in companies like Regulus Therapeutics Inc. and company’s stock has rallied. TG Therapeutics Inc. Regulus "has an inhibitor for Hepatitis C that with a single Greenlight sold the shares at $15.01 injection has been able to cure some patients in as little as four weeks," he said at apiece on Wednesday, a filing with the the time, adding that the leading regimens on the market require most patients take Securities and Exchange Commission on the drug for as much as 12 weeks. "We like to see companies aspiring to dominate Friday shows. The hedge fund owned a disease," he said, citing TG’s pipeline of drugs targeting different vulnerabilities of 29.4 million shares of Consol as of May non-hodgkin’s lymphoma. 12, making it the company’s third-largest shareholder, according to data compiled by Bloomberg. Consol has spent recent years shifting its focus away from coal and toward natural gas. The Canonsburg, Pennsylvania-based company capitalized on the surging production of the heating and power-plant fuel in the surrounding Marcellus and Utica shale regions. The driller was one of Greenlight’s most profitable positions in the first quarter. Just a month ago, the hedge fund wrote in a letter that it had taken a bet that the price of natural gas will rise as energy drilling subsides. Jonathan Gasthalter, a spokesman for Greenlight, declined to comment. Brian Aiello, a spokesman for Consol, also Source: Bloomberg declined to comment. For a live version of this chart, click on image or run G #HF.BRIEF 16. Consol rose 55 cents, or 3.6 percent, in New York trading to close at $15.66 on Since May 26, 2015, Regulus has fallen almost 54 percent through June 6, and TG Friday. The stock has more than tripled is down about 48 percent through the same time period. Kolchinsky was not its value since falling on Jan. 15 to $4.99, available for comment. its lowest level since the 1990s. Shares are gaining just as natural gas futures rebound, rallying 2.6 percent this year. Management partner Masahiko environment and interest rates will be — Tim Loh Yamaguchi said. suppressed for a long time, he said. The upside can be achieved by The company is very cheap at 0.64x including real estate professionals net-asset-value, he said, adding that NTT NTT Urban Could Rally 40%, among its management, delisting the Urban historically has higher vacancy Says York's Yamaguchi company or selling a stake to another rates than its competitors, and it may get real estate developer to form an unlisted 5 trillion yen of asset injection over next NTT Urban Development Corp., a joint venture, he said last week at the couple of years, Yamaguchi said. Japanese property developer, could rally 2016 Sohn Conference Hong Kong Read more investment picks from the at least 40 percent, York Capital presented by the Karen Leung conference here. Foundation. The real estate industry — Bei Hu benefits from a low-rate
June 7, 2016 Bloomberg Brief Hedge Funds 9
REGULATORY/COMPLIANCE June 7, 2016 Bloomberg Brief Hedge Funds 10
REGULATORY/COMPLIANCE
U.S. Repays $6M to Hedge Fund in Insider-Trading Turn Ex-Moore Trader, Firm to Strike $6 million from the total that Manhattan U.S. Attorney Preet Bharara extracted Pay $2.5 Million in Case from hedge funds and executives caught in his seven-year insider-trading dragnet. U.S. prosecutors have agreed to return that amount to Diamondback Capital Hedge fund manager Tim G. Leslie Management LLC in a deal approved by a federal judge on Thursday. The hedge fund and his firm James Caird Asset paid the $6 million to the government as part of a 2012 non-prosecution agreement Management will pay more than $2.5 related to Bharara’s insider-trading probe. The fund, which at its peak managed $5.8 million over U.S. Securities and billion, closed later that year. The U.S. government has been made several of these Exchange Commission claims that unusual repayments in the aftermath of its historic pursuit of insider trading, which led to they misallocated trades between two 80 convictions, brought down at least five hedge funds and resulted in more than $2 funds and misled investors. billion in payments from defendants. Fourteen of those convictions have now been Leslie, 49, misallocated trades overturned — including two that were struck down by an appeals court in 2014, opening between his main $2 billion fund, the door for the victors and others to claw back penalties and fines from the Justice which made shorter-term Department and the U.S. Securities and Exchange Commission. The government has investments, and a $100 million now handed back more than $40 million in all, including to three individuals whose closed-end credit fund designed to convictions were overturned and two of the hedge funds where they worked. make long-term investments in hard- "Reversals are uncommon in general," said Stephen Miller, an attorney with Cozen to-sell assets, according to an SEC O'Connor. "That would make the return of money even more uncommon." complaint issued Friday. Leslie will Jim Margolin, a spokesman for Bharara, declined to comment on the repayment. pay $2.1 million and his London- “We recognize that it is highly unusual for the government to voluntarily take this based James Caird will pay action and appreciate their efforts to bring fair and final closure to the matter,” Steve $400,000, the SEC said. Bruce, a spokesman for Diamondback, said in a statement Friday. Leslie benefited from the trades as Diamondback originally agreed to pay the penalties to end Bharara’s criminal he had invested twice as much of his investigation and a regulatory probe by the U.S. Securities and Exchange Commission. own money in the credit fund and As part of the $9 million deal, Diamondback obtained a non-prosecution agreement in owned a larger part of it than he did January 2012 just as the government was announcing criminal charges against with the main fund, JCAM Global, the Diamondback fund manager Todd Newman and Level Global Investors LP co- SEC said. The owner of an founder Anthony Chiasson. Diamondback continued operating until December 2012, investment firm, which the regulator about 10 months after Newman and Chiasson were charged. identifies as Advisor A and where The SEC repaid Diamondback $3 million earlier this year. Level Global, which closed Leslie had previously worked since after federal prosecutors raided its offices, also won judicial approval earlier this year to 2003, indirectly owned a 50 percent get back $21.5 million it had paid to the SEC. The SEC didn’t oppose the requests. stake in the credit fund, according to Newman got back $1.73 million that he’d been ordered in 2013 to put in escrow by US. the complaint. District Judge Richard Sullivan, pending the outcome of his his appeal, said his attorney At that time, Leslie worked at John Nathanson. Chiasson was repaid $6.38 million in criminal fines and forfeitures he’d Moore Capital Management, run by placed in escrow in 2013 pending his appeal, his attorney, Greg Morvillo, said. billionaire Louis M. Bacon and — Patricia Hurtado and Neil Weinberg where Leslie had started JCAM Global in 2003. Leslie spun it out in 2008 when he started his own firm, EU Bank Research Rules Seen Biting U.S. Managers James Caird, and started liquidating U.S. money managers are bracing for the fallout of looming financial regulation in it in 2011 following losses. Europe. That’s according to a report by research firm Tabb Group LLC, which found that Leslie and his firm settled the SEC’ 66 out of 100 hedge fund and asset managers surveyed expect Europe’s vast s claims without admitting or denying regulatory overhaul to change their American business, too, even if similar rules never wrongdoing, the agency said. He didn’ make it to the U.S. That’s up that’s up from 38 percent last year, according to the report. t respond to a voice message left on The Tabb report, released Wednesday, specifically focused on the European Union’s his mobile phone, or an e-mail. His plans to separate research from execution spending. The EU’s revamp of market rules office line was dead. Sharron Silvers, known as MiFID II, expected to go into effect in January 2018, is part of regulatory a spokeswoman for Moore Capital, efforts to prevent another financial crisis. The rules are designed to shift trading onto wasn’t able to immediately comment. exchanges where regulators can better track it, boost transparency to protect individual James Caird managed $3.5 billion investors and level the playing field for professionals. The plans will reach U.S. money at its peak, according to the SEC. managers who will have to, among other things, provide more detailed reports on Leslie currently owns and runs a firm research spending and how they choose brokers, according to the survey. called JCAM Investments, which is “The biggest impact that is going to bite everybody in the butt is the reporting registered in the U.K. requirements,” said one large asset manager quoted anonymously in the report. “It’s a — Saijel Kishan real challenge to have clean data dictionaries and, going from there, it’s getting to either developing things internally or farming it out.” — Annie Massa
OVER THE HEDGE June 7, 2016 Bloomberg Brief Hedge Funds 11
OVER THE HEDGE
Donald Trump supporters are courting Mercer, had no immediate statement on continued to take part in anti-Hillary powerful conservative donor Robert the effort, and it’s still unclear whether Clinton activities since Trump became Mercer to be a central part of a yet-to-be- Mercer will agree to get involved. the de facto nominee in early May. formed super-PAC to support the Meanwhile, donors who organized a — Jennifer Jacobs and Zachary Mider presumptive Republican presidential fundraiser for Trump in California last A Lion of Judah pin is a symbol of nominee, two people familiar with the month are forming another new super- women’s philanthropy at UJA-Federation effort said. Mercer, the co-CEO of New PAC, and that one is likely to come of New York. As for men, they got York hedge fund Renaissance together sooner, one of the people boutonnieres at UJA’s Investment Technologies, initially backed Texas familiar with the effort said. That super- Management Division event at the Plaza Senator Ted Cruz for president. He is PAC would likely become the favorite on June 2. Jeffrey Keswin of Lyrical one of the biggest donors in the 2016 place for a variety of donors to maximize Partners received the Daniel S. Och presidential race so far, federal records contributions to Trump, while the possible Award and Jeffrey M. Stern of Forum show. If Mercer, 69, were to jump on Mercer-backed PAC would be Capital Partners received the the Lifetime board with Trump, it would send a predominantly funded by his family, the Achievement Award. Also seen: Bruce message to other conservative donors person said. Mercer has spent $16.7 Richards, Marc Utay, Andrew who are either uncertain about whether million funding outside groups in the Rechtschaffen, Brett Barth and Rabbi to back the candidate, or uncertain about 2016 election cycle, according to the Angela Warnick Buchdahl. which pro-Trump political organization is nonpartisan Center for Responsive — Amanda Gordon (To see Amanda Gordon's the best place to park their money. Politics. Although Mercer hasn't publicly full Scene Last Night columns on the Bloomberg Kellyanne Conway, a spokeswoman for taken a position on Trump, his family has terminal, click here.)
ACTIVIST SITUATIONS COMPILED BY PATRICK BROWN, BLOOMBERG DATA
Significant Actions at Companies Targeted by Activist Investors
COMPANY ACTIVIST WHAT HAPPENED Activist with a 0.5 percent stake urged the company's board in a June 6 letter to engage with shareholders to address the NorthStar Asset Land & Buildings "woefully inadequate nature" of its planned merger with Colony Capital Inc., adding that the "announced transaction price Management Group Inc. Investment Management and consideration for NSAM does not fully reflect its intrinsic value today." Knight Vinke Shareholders of Germany's largest utility, which has heard calls from the activist to further separate its regulated business EON SE Institutional Partners network, are scheduled to vote on its breakup on June 8, Bloomberg News reported June 6. Investors Michael Pair of dissident New York REIT investors said in a statement June 6 that they are against a planned merger with the JBG Cos. Ashner and Steven closely held owner of Washington-area properties, and may run their own slate of candidates for the copmany's board. Witkoff Activist investor released a letter June 2 recommending that the retailer cut costs more aggressively, repurchase stock, expand its Soma brand while boosting sales at its Chico's and White House Black Market stores and better align Chico's FAS Inc. Barington Capital Group compensation with performance targets. The letter expands proposals the activist outlined last month, and signals a ramps up in its campaign for two board seats at the retailer. U.S. network and cyber-security software compare targeted by activist investor with a 7 percent stake hired Morgan Inflobox Inc. Starboard Value Stanley for activist defense, Bloomberg New reported June 6, citing people familiar with the matter. The hiring may delay a sale of the Santa Clara, California-based company, the people said. Activist amended its pact with the company through a May 31 filing, and the company agreed to include activist's two ConAgra Foods Inc Jana Partners LLC board nominees in its proxy statement for the 2016 annual meeting of stokcholders. Source: Bloomberg News, NI SHRHOLDACT
DEAL ARBITRAGE June 7, 2016 Bloomberg Brief Hedge Funds 12
DEAL ARBITRAGE
The table below tracks pending corporate mergers in North America and the deal spreads — the difference between the offer price and the target's stock price. The table shows the week-over-week change in those spreads through yesterday. Spreads that have moved by 2 percent or more are flagged in the far right "major move" column by an arrow indicating the direction of movement. Projected annualized returns are based on the spread and the deal's expected completion date.
1W EXPECTED OFFER PROJECTED DEAL TARGET PAYMENT CHANGE MAJOR TARGET ACQUIRER COMPLETION PER SPREAD ANNUALIZED SIZE (M) PRICE TYPE IN MOVE DATE SHARE RETURN SPREAD AGL Resources Inc Southern Co/The 11,937 12/31/16 66.00 65.73 Cash 0.4% 0.7% -0.1% Alere Inc Abbott Laboratories 8,040 - 56.00 42.96 Cash 30.4% - -0.9% Consortium led by David Amaya Inc 6,487 - 21.00 19.24 Cash 9.1% - -2.5% ▼ Baazov Anacor Pharmaceuticals Inc Pfizer Inc 4,633 09/30/16 99.25 99.15 Cash 0.1% 0.3% 0.3% Cablevision Systems Corp Altice NV 17,835 06/30/16 34.90 34.66 Cash 0.7% 10.5% 0.0% Cigna Corp Anthem Inc 50,382 12/31/16 171.63 129.63 C&S 32.4% 56.9% 0.1% NorthStar Asset Colony Capital Inc 6,024 03/31/17 17.32 17.24 Stk 0.5% 0.6% 0.5% Management Group Inc Columbia Pipeline Group Inc TransCanada Corp 12,026 07/01/16 25.50 25.51 Cash 0.0% -0.6% 0.1% EI du Pont de Nemours & Co Dow Chemical Co/The 65,591 12/31/16 68.75 68.75 Stk 0.0% 0.0% 0.4% EMC Corp/MA Dell Inc 63,491 10/31/16 30.99 27.97 Cash 10.8% 26.8% 0.6% Humana Inc Aetna Inc 28,906 12/31/16 227.42 189.38 C&S 20.1% 35.3% -4.1% ▼ IHS Inc Markit Ltd 9,774 12/31/16 120.07 119.91 Stk 0.1% 0.2% 0.9% Quintiles Transnational IMS Health Holdings Inc 12,559 12/31/16 25.81 26.17 Stk -1.4% -2.4% -2.3% ▼ Holdings Inc Tianjin Tianhai Investment Ingram Micro Inc 6,133 12/31/16 38.90 34.86 Cash 11.6% 20.3% -0.3% Co Ltd ITC Holdings Corp Fortis Inc/Canada 11,150 12/31/16 46.69 45.17 C&S 3.4% 5.9% -0.3% Johnson Controls Inc Tyco International Plc 28,667 09/30/16 40.12 44.64 C/S -10.1% -31.9% -0.5% KLA-Tencor Corp Lam Research Corp 10,955 06/30/16 73.16 72.74 C&S 0.6% 8.8% -0.1% Nexstar Broadcasting Group Media General Inc 4,474 12/31/16 17.17 17.97 C&S -4.5% -7.8% -1.0% Inc Medivation Inc Sanofi 8,766 - 52.50 59.63 Cash -12.0% - 1.7% Monsanto Co Bayer AG 61,698 - 122.00 108.76 Cash 12.2% - 0.7% NorthStar Realty Finance NorthStar Asset 10,055 03/31/17 12.99 12.95 Stk 0.3% 0.3% 0.3% Corp Management Group Inc Piedmont Natural Gas Co Inc Duke Energy Corp 6,536 12/31/16 60.00 60.17 Cash -0.3% -0.5% -0.3% Questar Corp Dominion Resources Inc/VA 5,965 12/31/16 25.00 25.02 Cash -0.1% -0.1% 1.1% Rite Aid Corp Walgreens Boots Alliance Inc 16,708 12/31/16 9.00 7.77 Cash 15.8% 27.8% -0.3% St Jude Medical Inc Abbott Laboratories 30,108 12/31/16 80.86 78.15 C&S 3.5% 6.1% -0.1% Talen Energy Corp Riverstone Holdings LLC 5,045 12/31/16 14.00 13.84 Cash 1.2% 2.0% 1.2% TECO Energy Inc Emera Inc 10,361 06/30/16 27.55 27.61 Cash -0.2% -3.3% -0.3% Valspar Corp/The Sherwin-Williams Co/The 11,206 03/31/17 113.00 108.37 Cash 4.3% 5.2% -0.8% Westar Energy Inc Great Plains Energy Inc 12,117 12/31/17 59.92 56.32 C&S 6.4% 4.1% 6.8% ▲ Williams Cos Inc/The Energy Transfer Equity LP 58,093 06/30/16 29.06 23.38 C/S 24.3% 369.3% 5.8% ▲ MARB
CALENDAR TO SUBMIT AN EVENT E-MAIL [email protected] June 7, 2016 Bloomberg Brief Hedge Funds 13
CALENDAR TO SUBMIT AN EVENT E-MAIL [email protected]
The "event" column links to websites, where available. "Attendees of note" links to the individual's BIO page, where available, on the Bloomberg terminal.
DATE ORGANIZER EVENT SPEAKERS/ATTENDEES OF NOTE/DETAILS LOCATION 2nd Annual Pacific Credit & Christopher L. Winiarz, University of California; Arn Andrews, June 7 Markets Group San Francisco Hedge Fund Investor Forum San Jose Federated City Employees' Retirement System. Middle Market Direct Ian Fowler, Babson Capital; Kal Kilgast, NXT Capital; John June 7 Bloomberg Chicago Lending Forum Chicago Martin, Antares Capital. Hedge Fund Marketing Kristen VanGelder, Evanston Capital; John Frede, 50 South; June 8 Bloomberg JW Marriott Chicago Forum Dianna Henrich, Grosvenor; Anthony Lombardi, Aon Hewitt. June 8-9 RG+Associates 13th Annual ConsortiumEast Michael Silva, Calpers; Kelly Williams, GCM Grosvenor. Intercontinental, New York '16 Alternative Investments Theodore P. Enders, Goldman Sachs AM; Anthony Scaramucci, June 15 Fidelity Investments The Pierre New York Forum SkyBridge; Mark Yusko, Morgan Creek. June 15 BattleFin Discovery Day Intrepid Anthony Scaramucci, SkyBridge; Michael Kieffer, Kieffer Capital. New York 4th Annual Research Gordon Ritter, GSA Capital; Yin Luo, Deutsche Bank; Matt Ober, June 16 RavenPack New York Symposium Millennium Partners. New England Credit & Eric Nierenberg, Massachusetts PRIM; James Mnookin, June 21 Markets Group Boston Hedge Fund Investor Forum Cambridge Associates; Kamal Suppal, NEPC. Brian Hurst, AQR; Ian Haas, Neuberger Berman; Sandy Rattray, June 21 Managed Funds Association Forum 2016 Four Seasons, Chicago Man AHL; Jackie Rosner, KKR Prisma. Cybersecurity Challenges Discussion of threats facing managers and practical steps to June 23 Hedge Fund Association and Solutions for Emerging Boston protect their business from cybersecurity threats. Managers Hedge Funds: Regulatory, Overview of key EU and U.S. regulatory frameworks, and third June 23-24 Storm-7 Consulting New York Risk and Compliance party administration. Mitigating Risks Caused by Paul Neale, DOAR; Mark S. Sidoti, Gibbons; R. Scott Garley, June 28 Hedge Fund Association Harvard Club, New York Rogue Employees Gibbons. Annual Benjamin Graham Jason Karp, Tourbillon Capital; Leon Cooperman, Omega June 29 NYSSA New York Conference Advisors; John Bader, Halcyon Capital. June 30 NYHFR, Bloomberg June Roundtable Maureen Sherry, author of "Opening Belle." New York July 11-14 Risk.net Quant Summit 2016 USA Maurizio Ferconi, BlackRock; Attilio Meucci, KKR. New York DISCLAIMER: The information on this page was compiled by Bloomberg from multiple sources, public and private, and is deemed to be accurate, but not definitive or exhaustive. Questions about events should be addressed to the event organizer.
Bloomberg Brief: Hedge Funds
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