Tuesday May 31, 2016

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Commodity Funds Get $5 Billion Embrace on Oil Gain NUMBER OF THE WEEK

BY NISHANT KUMAR AND JESSE RISEBOROUGH $22 million — Aid that Bridgewater The rally in oil has given a fillip to long-suffering funds. After four Associates will receive from years of hemorrhaging cash and clients, managers are once again making money and , which has been working to winning back investors. keep businesses from leaving the state. About $5 billion has coursed into the funds in 2016, with the first quarter seeing the biggest inflows since 2009, data compiled by eVestment show. Investors are being INSIDE drawn by gains of more than 18 percent reported in a letter to clients by Stuart Glenview's Capital Partners fund rose Zimmer's ZP Energy Fund in and 12.7 percent posted by Pierre Andurand's $1.1 billion Commodities Master Fund in London. Fund officials declined to comment. 2.6 percent in April. Tourbillon Capital “Funds that survived a significant fall in the oil price and in most commodities are Partners' global master fund rose 3 clearly real hedge funds,” said Michele Gesualdi, the London-based chief investment percent last month: Returns in Brief officer for hedge-fund investing at Kairos Partners, who oversees $2.5 billion and has re-started investing in funds. “There are not many funds operating in this Blackstone's James says hedge funds asset class and some of them are extremely volatile.” may lose 25 percent of assets in the next With crude flirting with $50 a barrel, after dropping to almost $26 in February, gold up year. DoubleLine's Gundlach says 14 percent this year and soybeans 24 percent higher, investors are betting that an Chanos is the greatest expanding U.S. economy will spur global growth. Commodity prices are unlikely to manager: Seen & Heard return to lows seen in the first quarter, according to Inc. Commodity money managers suffered outflows totaling $6.2 billion from 2012 through Tudor Pickering Holt & Co.'s Pickering 2014, starving them of capital and forcing some players out of the business. More than said in March that oil prices had already a dozen asset managers including Clive Capital LLP, Centaurus Energy LP and firms bottomed: Market Calls, Revisited such as Higgs Capital and Mastic Investment closed funds. Now the prospect Omni Event Fund's Melsom says the Commodities Lured Investors of higher oil prices fund is seeing opportunities in European is encouraging new M&A: Spotlight startups. Former Brevan Howard Permanent Fund Corporation and Moore Capital was scheduled to have a hedge fund money manager panel discussion with presentations from Luke Sadrian said Albourne, AQR and Blackstone: From he is preparing to the Minutes open a commodities fund Pelargos Capital joins funds' bet on a in London in the turnaround at battered Honda. AE second half of Capital trimmed bets against the 2016 that will trade Australian dollar: Market Calls futures and options on all commodities QUOTE OF THE WEEK About 290 commodities-focused hedge funds tracked by eVestment and bet on a rising oil price. managed $70.5 billion at the end of March, rebounding from a near six- "If you can find the intersection year low of $65.4 billion at the end of last year. Average returns were Not everyone 6% in the first four months of the year, after a loss of 10.4% last year. expects the dark where an activist is looking to clouds to shake up a company — and that disappear. Goldman Sachs Group Inc. sees no “sustainable shift in fundamentals” and company's fundamentals are says higher U.S. interest rates will keep the outlook bearish. Concerns that ’s already deteriorating or have the faltering economy and its growing bad-debt burden will slow growth continue to weigh on some commodities. potential to deteriorate — that's Geoff Blanning, Schroders' commodities head, said it’s almost “politically incorrect to where you can find very say that you’re buying commodities,” but those investing will earn strong returns in the interesting opportunity." next two to three years. Schroders started a fund with its own money last month and is — David Ford, founding partner/co-portfolio raising capital from investors to bet on the energy, agriculture and metals sectors. manager at Latigo Partners, in an interview — With assistance from Hema Parmar, Will Wainewright, Andy Hoffman and Colin McClelland

RETURNS IN BRIEF May 31, 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].

Glenview Capital Management's April Returns Capital Partners fund rose 2.6 percent in April, paring this year's loss through April 30 to 9.5 percent, according to a person familiar with the matter. A spokesman for the $8.2 billion firm, run by Larry Robbins, declined to comment. — Hema Parmar and Saijel Kishan Jason Karp’s Tourbillon Capital Partners trimmed losses for the year to 13.6 percent in its global master fund after it rose almost 3 percent last month, according to a person familiar with the matter. Amy Zipper, the $4 billion firm’s chief operating officer, declined to comment. — Hema Parmar and Saijel Kishan PlusTick Management, the $75 million Charlottesville, -based hedge fund that focuses on distressed investments, gained 15.5 percent in its PlusTick Partners fund in April, bringing returns for the year to almost 22 percent, Year-to-Date Returns to End-April according to an investor letter obtained by Bloomberg. The fund’s largest long positions are in the equity of Straight Path Communications Inc., which holds licenses to airwaves, and both the equity and debt of Sanchez Energy Corp. "In March and April we bought distressed high-yield energy bonds and took some relatively small positions in the equities of those issuers," managing partner Tom Hill said in a telephone interview. "Both have had significant upside moves over the past two months." Hill said about half of the fund’s year-to-date gains came from its energy bets. "We had a large short allocation to energy last year going to January and February, and covered that in March when we flipped to long- biased in energy," he said. PlusTick was founded in December 2012 by Hill and *Returns through April 22 Adrian Keevil. euro share class last month, paring this 11.1 percent last year. The figures were — Hema Parmar year’s loss through April 30 to 4.5 confirmed in an e-mailed statement from Marshall Wace Asset Management’s percent, according to a performance a spokesman for Marshall Wace, which MW Eureka Fund rose 0.6 percent in its document. The $7.7 billion fund, bets long and short on equities. managed in London by firm cofounder — Will Wainewright Paul Marshall, rose

May 31, 2016 Bloomberg Brief Hedge Funds 3

FROM THE MINUTES ITEMS MAY BE SUBMITTED TO [email protected] May 31, 2016 Bloomberg Brief Hedge Funds 4

FROM THE MINUTES ITEMS MAY BE SUBMITTED TO [email protected] -Led Bridgewater Lands Connecticut Aid

BY BRIAN CHAPPATTA AND KATIA PORZECANSKI LP, the world’s largest hedge fund, will receive $22 million in aid from Connecticut, which has been working to keep businesses from leaving the State Retirement and state. Pension System’s investment The firm, led by billionaire , was approved for a $5 million grant and a $17 committee was scheduled to hear a million loan to expand in Westport, Wilton and Norwalk, according to minutes of the presentation from Albourne Partners, state bond commission’s meeting on Friday. The loan may be forgiven if Bridgewater, the system’s hedge fund consultant, which manages about $150 billion, retains some 1,400 jobs and creates 750 new ones at a meeting on May 6, according to through 2021. the agenda. The next investment Connecticut was in direct competition with states including New York when talks over committee meeting is scheduled to the funding began with Bridgewater in 2012, Democratic Governor Dannel Malloy said take place on Sept. 2. at the meeting. The company is receiving the assistance as hedge funds come under scrutiny from clients, including public pension funds, for charging hefty fees while Alaska Permanent Fund delivering lackluster results. Corporation was scheduled to have “We were aware of specific campuses in other states we were competing with,” Malloy a hedge fund panel discussion at its said. “I wish we didn’t compete that way, that dollars were not part of the competition, May 24-25 meeting of the board of but the reality is that they are.” trustees, according to the board The measure drew rebukes from State Representative Christopher Davis and packet. The discussion was Comptroller Kevin Lembo, who said Connecticut can’t afford to be “picking winners and scheduled to provide trustees with losers” when its stagnant economy led to two credit downgrades this month. Davis told current hedge fund industry Malloy at the meeting that Bridgewater can afford the cost of the expansion without perspectives as well as impressions public funds and that it came to the state “as a lender of first resort.” on the APFC’s Connecticut is the wealthiest U.S. state, yet has had difficulty balancing budgets as its portfolio from Albourne Partners, its finance-based economy struggles to rebound from the last . Malloy has independent third-party absolute pushed through tax increases to fill the shortfalls, though he now warns of a “new return consultant. Other panel economic reality” that must be addressed with spending cuts. participants included AQR and The state has turned to financial incentives to keep companies within its borders. It Blackstone, according to the packet. suffered a blow earlier this year when General Electric Co. announced it would move its headquarters to Boston, after residing in Fairfield since 1974. That came even after — Compiled by Ainslie Chandler and Malloy pulled back on a plan to raise business levies that led GE to look elsewhere. Melissa Karsh Other financial companies have received loans like the one approved for Bridgewater. In October 2014, Connecticut extended through 2021 an agreement with UBS AG that gave the bank a $20 million loan that doesn’t have to be repaid if it keeps at least 2,000 employees in-state. Bridgewater was founded by Dalio in 1975 from his two-bedroom apartment. Its Pure fund tumbled 6.7 percent in the first quarter of this year, according to a person familiar with the returns. Dalio earned about $1.4 billion last year, according to ’s Alpha’s 2016 Rich List. He’s worth about $14.1 billion, ranking him the 60th richest person in the world, according to the Bloomberg Index.

Q&A May 31, 2016 Bloomberg Brief Hedge Funds 5

Q&A Activist Shareholders Signal Distressed Bond Opportunity, Says Latigo's Ford

David Ford, Founding Partner/Co-Portfolio Manager, Latigo Partners > Shareholder activists involved in deteriorating credits create short bond opportunities. > NGPL, Freeport-McMoRan bonds have value. Interviewed by Tania Chen, Bloomberg, on May 19

Q: What's your outlook? easier to avoid a bankruptcy but if you Q: How else do you pinpoint trades? A: Our focus is investing in distressed. have to go through bankruptcy that's fine. A: If you think about the role of the With the uptick in defaults and We've seen enough bankruptcies and activist, it's to create value for restructurings, for the next 6 to 12 been involved in hundreds of them over shareholders. Often that comes at the months that is definitely going to continue. the years that we have a pretty good idea expense of creditors. No activist has ever of how cases are going to shake out. walked into a boardroom and said, "I Q: How do you pick investments? have a great idea, let's pay off the debt!" A: We run a concentrated portfolio. We Q: You prefer liquid assets, but isn't If you can find the intersection where an invest in 35 to 40 positions at any one that space very competitive? activist is looking to shake up a company time. We like a big situation where there A: We're looking for situations where we — and that company's fundamentals are is a lot of debt where the securities trade can add value through a bond that's got already deteriorating or have the on a regular basis — where there is still a different covenant or some sort of potential to deteriorate — that's where liquidity. structural advantage that maybe the you can find very interesting short market overlooked. We think of ourselves opportunity. Q: How much of the portfolio is in the as a speed boat that maneuvers between energy sector? the super tankers. Q: What are examples of bond shorts A: It's a growing percentage. If you like that? looked at midstream, some recent E&P Q: Where have you seen opportunity? A: J.C. Penney was one. Transocean investments, as well as pipelines which A: Earlier this year, the European bank was another one where an activist had remain our largest investment, it's over Tier 1 market. That sector sold off really put in place a dividend where the 25 percent. Midstream is an area where hard in February with the Deutsche Bank company was going to have a very hard we've spent a tremendous amount of scare. We had the opportunity to invest time to pay. time over the last year. NGPL has been both in AT1s and legacy Tier 1s at our biggest position for quite a while. significantly lower prices than what we Q: What else are you buying? NGPL was an 8 percent position. had seen just a few months earlier. It A: We got attracted to Freeport- was at a subsidiary that was better McMoRan earlier this year. Bonds have Q: How did you invest in their bonds? capitalized than the bank but had a already moved up into the 70s but we A: We started out in the front end of the support agreement from the bank. It was think they are well covered at par as the curve, the 2017 maturity and we like your classic double dip and company continues to sell assets. We ultimately rotated into the longest dated you could buy it at the same price as like that situation, where management is 2037s, which have had the most upside other Tier 1s and so you got that doing all the right things for creditors, recently with the recent capital injection. structural enhancement for free. What paying down debt and improving the we're always looking for is this idea of credit profile, and you have this Q: How else do you play energy? free optionality: multiple ways to win. embedded call option in the energy A: [In midstream] if you could buy business. something that traded like it took commodity price risk but wasn't actually taking commodity price risk, that was a At A Glance great place to be where you had good BREAKFAST: Green juice downside protection. That's what brought us to midstream and NGPL. Bonds that BOOK: Seven Brief Lessons on Physics by Carlo Rovelli were in the 70s and 80s are now all GUEST LECTURER: On distressed investing at Columbia University Graduate above par. School of Business CAREER: 2002-2005 portfolio manager at Satellite Asset Q: What if NGPL had gone under? Management in charge of credit and distressed related A: We thought we had good downside investments. 2000-2002 launched distressed component protection when we looked at what a of Och Ziff's business. 1994-1999 PM of restructuring might look like. It's always ING Barings’ North American proprietary and merger portfolios LATIGO AUM: $556 million as of Jan. 1

SEEN & HEARD May 31, 2016 Bloomberg Brief Hedge Funds 6

SEEN & HEARD

Hedge Funds May Lose 25% of Assets, Blackstone’s James Says BY SCOTT DEVEAU AND DEVIN BANERJEE market during a bull run because they’re hedged to reduce The $2.9 trillion hedge-fund industry may lose about a quarter volatility. Blackstone’s fund of hedge funds has about one-fifth of of its assets in the next year as performance slumps, said Tony the volatility of the and about 65 percent of the James, Blackstone Group LP’s billionaire president. upside, he said. “It’s kind of a day of reckoning that we face here,” James said “For a while that’s a good trade for them,” James said of Wednesday in an interview with Bloomberg TV Canada’s investors in hedge funds. “But the longer that bull market goes, Pamela Ritchie at a conference in Toronto. “There will be a they fall further behind. Pretty soon, they don’t like that trade shrinkage in the industry and it will be painful. That’s going to be anymore.” pretty painful for an awful lot of places.” James also called out hedge-fund managers for the fees they The hedge-fund industry is having its worst start to a year in charge, which are typically 2 percent of assets annually and 20 performance and investor withdrawals since global markets percent of investment profits — a structure he said “is hard to reeled after the financial crisis. Third Point, the hedge-fund firm justify these days.” Billionaire last month founded by Dan Loeb, last month said the industry is in the first described such fees as “a compensation scheme that is stage of a “washout” after “catastrophic” results this year. unbelievable,” and Bill Gross of Janus Capital Group Inc. said on Hedge funds have lost 1.8 percent this year, according to Twitter: “Hedge fund fees exposed for what they are: a giant Hedge Fund Research’s global index, the poorest performance ripoff.” since 2008. The industry had net outflows of $16.6 billion in the Tudor Investment Corp. is trimming fees, according to a letter past two quarters, the most since 2009, according to HFR. In sent to clients. The $11.6 billion firm, run by Paul Tudor Jones, 2015, 979 funds closed, more than any year since 2009, will reduce fees for a share class that contains most of its according to the research firm. biggest fund’s money to 2.25 percent of assets and 25 percent Blackstone is the largest allocator to hedge funds globally, and of profits starting July 1. That’s down from 2.75 percent and 27 the New York-based firm also provides startup money to percent. managers and buys equity stakes in hedge-fund firms. Results in “We’re talking about three years of under-performance, the its hedge-fund business are better than the industry average, fact that investors pulled $1 billion of capital and already a 2-and- James said, though performance generally remains a cause for 20 fee structure which is under duress,” Ilana Weinstein, the concern. “We’re definitely worried about what’s going to happen chief executive officer of IDW Group, which recruits investment in the hedge-fund world right now,” he said, speaking at the professionals for hedge funds, said of Tudor. “Investors aren’t Canadian Venture Capital and Private Equity Association’s really excited about a slight discount for crappy performance.” annual conference. “There’s going to be a real weeding out of hedge funds,” she Hedge-fund managers have been stymied by said Wednesday on Bloomberg TV. stimulus worldwide, declining trading volumes and markets Blackstone had $68.5 billion dedicated to hedge funds as of marked by wide swings in prices. Carlyle Group LP’s David March 31, and the business produced $244 million in economic Rubenstein said this month he was surprised that “so many income, which includes realized and unrealized gains and macro people got it wrong.” Carlyle owns three hedge-fund firms losses, in the past year, down 35 percent from the previous 12 and on May 20 said Mitch Petrick, the head of the unit that months. The alternative asset manager, run by James and CEO houses the firms, stepped down. Steve Schwarzman, oversaw $344 billion in real estate, private James said hedge funds may be expected to under-perform the equity holdings, credit assets and hedge funds at the end of the first quarter. — With assistance from Saijel Kishan

DoubleLine’s Gundlach Says Chanos Is Greatest Hedge Fund Manager BY JOHN GITTELSOHN including William Ackman, David Einhorn and Leon Cooperman Jim Chanos, founder of Kynikos Associates, is the best lost money last year because they were unable to benefit from hedge fund manager because he’s permanently bearish and momentum , Gundlach said. avoids the group think that led others in his industry to lose “It’s not a trending market,” Gundlach said. “You can’t just play money last year, according to bond manager Jeffrey Gundlach. momentum.” “The greatest hedge fund manager in the world is Jim Gundlach’s $59.7 billion DoubleLine Total Return Bond Fund Chanos,” Gundlach, chief executive officer of DoubleLine is up 2 percent in 2016 and has outperformed 97 percent of its Capital, said Thursday during a wide-ranging presentation in Bloomberg peers over the past five years. DoubleLine Capital’s Beverly Hills, . “Jim Chanos is a permanent bear. He’s total stood at $99.7 billion as of dour, he’s curmudgeonly, he’s bearish as hell all the time.” Thursday, according to Ron Redell, the Los Angeles-based Gundlach said he would personally invest with Chanos, who’s firm's executive vice president. best known for short-selling. Unlike Chanos, prominent managers

MARKET CALLS ITEMS MAY BE SUBMITTED TO [email protected] FOR CONSIDERATION May 31, 2016 Bloomberg Brief Hedge Funds 7

MARKET CALLS ITEMS MAY BE SUBMITTED TO [email protected] FOR CONSIDERATION

Pelargos Joins Funds’ Bet MARKET CALLS, REVISITED BY HEMA PARMAR on Turnaround at Honda

Pelargos Capital BV, a Dutch hedge Tudor Pickering Holt & Co.’s co-founder Dan Pickering on March 31 said oil fund manager that’s prospered by prices had already bottomed. "We saw prices down in the $25 a barrel range last snapping up battered stocks, is adding to month and that feels like we’ve seen the lows," Pickering, whose energy-focused its stake in Honda Motor Co. and is firm manages $1.9 billion, said at the time. "We’re going to see meaningfully better predicting that shares may double, prices over the next 18 months or so." joining other investors placing faith in a recovery for the besieged automaker. “The market clearly hates Honda,” said Michael Kretschmer, chief investment officer of Pelargos, a manager of $237 million that was spun off from insurer Aegon NV. “If you assume in the long run they will go back to profitability, like they have in the past, you can easily double your money on Honda.” Pelargos joins money managers such as ClearBridge Investments and American Century Investments that have accumulated more than 63 million shares of Honda since 2015, triple the 22.6 million shares sold in the same period, according to regulatory filings. Honda For a live version of this chart, click on image or run G #HF.BRIEF 15. shares have dropped about 22 percent in the past six months amid recalls of a Since WTI crude fell to $26.21 a barrel on Feb. 11, prices almost doubled to top $50 supplier’s faulty air-bags and are trading a barrel on May 26 before retreating slightly later that day. WTI crude was trading at at 0.8 times their book value, near the about $49.54 at 9 a.m. in New York. In June 2014, the commodity traded at $107 a lowest in the last 20 years. barrel. "The trend of the tightening supply-demand balance is firmly in place but Pelargos, which has almost half its there are enough short-term issues such as Iranian production coming back, assets in a Japan-focused strategy, producer hedging, more drilling in the U.S.," Pickering said in a May 27 interview. tends to outperform during market "All of those may intermittently spook the market this year but overall we will be downturns. The $104 million Pelargos tighter by the end of the year." Pickering said there’s "a good chance" oil will reach Japan Alpha Fund advanced 3.2 percent at least $60 a barrel by the end of the year. in the first four months of this year, compared with a 14 percent decline for gauges shifts in the world’s two biggest in financial markets, had bet on a decline the MSCI Japan Index in the period, and economies. in the Aussie against the greenback in beat that benchmark in 2010 and 2011 The Australian, Canadian and New late April, before cutting its position on amid broader market declines. Zealand dollars will likely be the most May 20, Pakula said. The has “Beaten up stocks, those with negative sensitive to changes in the outlook for U. dropped below 72 U.S. cents, from a 10- price momentum and strong S. interest rates and for the economy in month high of 78.35 reached last month, underperformance, draw our attention,” China, the biggest consumer of raw after the Reserve Bank of Australia cut Kretschmer said. materials, said Chief Investment Officer its benchmark rate to a record low in May. Kretschmer said he may buy more Lyle Pakula. The three are among the “I don’t think you’re going to see Honda shares, boosting the stake to four worst performers in the Group-of-10 another 6-to-7 cent drop in the Aussie in account for as much as 5 percent to 7 this month as traders boosted the short term,” Pakula said in an percent of the fund’s assets, from about bets the Federal Reserve will raise rates interview. “You’d need some massively 2 percent. as early as June. Pakula says they could positive U.S. data and very negative — Kathleen Chu and Komaki Ito, with assistance rally if the U.S. central bank delays or Australian data to really push through from Craig Trudell and Ma Jie should commodity prices resume gains. that barrier.” AE Capital made about 6 percent in the The Aussie has tumbled 4.8 percent AE Capital Cuts Profitable first four months of the year, according to this month to 72.36 cents as of 5:30 p.m. the manager, outperforming the average in Sydney Tuesday. The currency gained Aussie Short 0.4 percent return of other hedge funds as much as 1 percent Tuesday following AE Capital, a hedge fund run by a tracked by Eurekahedge Pte. The fund, economic reports on building approvals former atmospheric scientist, trimmed which uses computer algorithms to trade and net exports. bets against the Australian dollar as it — Netty Ismail

OVER THE HEDGE May 31, 2016 Bloomberg Brief Hedge Funds 8

OVER THE HEDGE

Ackman Dangles Meeting With ‘Hamilton’ Star for Rapper Scientist

BY AMANDA GORDON well-connected and philanthropic hedge fund manager can The Park Avenue Armory presents some interesting be. theater, but it’s never seen anything like the Wednesday Ackman has a vested interest in keeping Mason in the lab. night performance by Christopher Mason, an associate He and his wife, Karen, are primary funders of the prize, professor of computational genetics at Weill Cornell which gives $200,000 a year for up to three years to young Medicine. scientists in New York. Standing in front of the Tiffany blue-glass mosaic in the In addition to Mason, this year’s winners are Omar Abdel- Armory’s Veterans Room — recently restored at a cost of Wahab and Andrea Ventura, whose labs are at Memorial more than $8 million — Mason rapped in honor of the 2016 Sloan Kettering Cancer Center; Uttiya Basu at Columbia presentation of the Pershing Square Sohn Prize for Young University; Agnel Sfeir of New York University School of Investigators in Cancer Research. Medicine; Samuel Sidi of Icahn School of Medicine at Mount "Like Aristotle gives philosophy, these models reveal Sinai, and Christopher Vakoc of Cold Spring Harbor radiation oncology," Mason rhymed, before taking aim at cell Laboratory. checkpoints, "precariously shifting states, endlessly The prizes are now in their third year, with New York nefarious as they ablate the orderly procession of lineage Community Trust joining as a funder of one of the awards. fates." Mason also described "splitting, conscripting, and They are presented by an alliance of the Pershing Square hitting mutant RNAs with new therapeutic forays." Foundation and the Sohn Conference Foundation, founded Pershing Square Capital Management’s Bill Ackman after professional Ira Sohn, who died of cancer. immediately rose to show his appreciation. Ackman has presented ideas at Sohn investment "The really sad thing is we’re going to lose him to conferences for years, and he had one at this event too: Broadway," Ackman said, before suggesting he could make teach scientists how to rap. It could be a useful tool for it happen. "Actually, I know Lin-Manuel," he said of the star fundraising, he said. and creator of the musical "Hamilton," indicating just how helpful a

ACTIVIST SITUATIONS COMPILED BY PATRICK BROWN AND MICHAEL THIEME, BLOOMBERG DATA May 31, 2016 Bloomberg Brief Hedge Funds 9

ACTIVIST SITUATIONS COMPILED BY PATRICK BROWN AND MICHAEL THIEME, BLOOMBERG DATA

Significant Actions at Companies Targeted by Activist Investors

COMPANY ACTIVIST WHAT HAPPENED Magnachip Activist investor with an 11 percent stake settled May 27 for two board seats at the South Korean chipmaker. The settlement, which concluded Engaged Semiconductor within weeks of the activist filing for up to four directorships, also included standstill provisions and that the pair will join the strategic review Capital Corp. committee. The largest shareholder with a 9.9 percent stake sent a letter on May 27 to the Canadian company's board urging it to “immediately engage an Tourbillon independent investment bank to advise on a value maximization process — including the execution of a sales process." The activist cited the SunOpta Inc. Capital supplier of organic and specialty foods' poor share-price performance in the past two years and said the firm has a “uniquely attractive Partners business” in the rapidly growing area of sourcing hard-to-find organic and non-genetically modified ingredients. London Stock Activist investor with a 4.25 percent stake said May 27 that it supports the company's proposed takeover by Deutsche Boerse AG, clarifying TCI Fund Exchange the motives behind its purchase of a sizable stake in the U.K.'s primary stock exchange. It hasn't always viewed the tie-up between the two Management Group Plc companies so positively when in 2005 it, along with another activist, forced Deutsche Boerse to drop its offer to by the company. Activist firm with a 9.9 percent stake filed a DFAN14A on May 26 proposing to modify the slate of six board nominees, citing continued Starboard Depomed Inc. concerns regarding what it calls corporate governance deficiencies, questionable capital allocation decisions and actions by the board to Value "stymie" strategic interest. Chico's FAS Barington Activist fund pushing for reductions in marketing expenses and improvements in corporate strategy plans to seek election of its founder and Inc. Capital another director to the company's board at the annual meeting scheduled for July 21, according to a May 24 statement. Land & The New York-based real estate investment trust agreed on May 25 to be acquired by closely held JBG Cos., creating an $8.4 billion real New York Buildings estate company focused on New York and -area properties. The activist fund had previously urged the firm to overhaul its board REIT Inc. Investment and was in favor of exploring a sale of the company. Management Source: Bloomberg News, NI SHRHOLDACT, BI BESG This story was compiled by Bloomberg LP employees involved with data collection and was edited by the News department. To suggest ideas or provide feedback, contact the editor for this story: Melissa Karsh at [email protected]. For more on activist investors from Bloomberg Intelligence, run BI BESG on the terminal.

DEAL ARBITRAGE May 31, 2016 Bloomberg Brief Hedge Funds 10

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 change in those spreads from Monday, May 23 through Friday, May 27. 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 DEAL EXPECTED OFFER PROJECTED TARGET PAYMENT CHANGE MAJOR TARGET ACQUIRER SIZE COMPLETION PER SPREAD ANNUALIZED PRICE TYPE IN MOVE (M) DATE SHARE RETURN SPREAD AGL Resources Inc Southern Co/The 11,937 12/31/16 66.00 65.64 Cash 0.5% 0.9% -0.1% Alere Inc Abbott Laboratories 8,040 - 56.00 42.57 Cash 31.5% 0.0% -4.2% ▼ Consortium Led By David Amaya Inc 6,487 - 21.00 18.75 Cash 12.0% 0.0% -3.5% ▼ Baazov Anacor Pharmaceuticals Inc Pfizer Inc 4,633 09/30/16 99.25 99.43 Cash -0.2% -0.5% 0.0% Axis Capital Holdings Ltd Arch Capital Group Ltd 6,560 - 65.00 54.80 Cash 18.6% 0.0% -1.2% Baxalta Inc Shire PLC 35,563 06/03/16 45.86 45.53 C&S 0.7% 38.1% -1.8% Cablevision Systems Corp Altice NV 17,835 06/30/16 34.90 34.67 Cash 0.7% 7.1% -0.3% Cigna Corp Anthem Inc 50,382 12/31/16 170.74 128.82 C&S 32.5% 54.5% -3.0% ▼ Columbia Pipeline Group Inc TransCanada Corp 12,026 07/01/16 25.50 25.53 Cash -0.1% -1.2% -0.1% EI du Pont de Nemours & Dow Chemical Co/The 65,591 12/31/16 66.89 67.17 Stk -0.4% -0.7% -0.4% Co EMC Corp/MA Dell Inc 63,491 10/31/16 30.67 27.83 Cash 10.2% 23.7% -0.4% Humana Inc Aetna Inc 28,906 12/31/16 219.85 173.74 C&S 26.5% 44.4% -0.9% IHS Inc Markit Ltd 9,774 12/31/16 121.78 122.66 Stk -0.7% -1.2% -1.9% Quintiles Transnational IMS Health Holdings Inc 12,559 12/31/16 25.61 25.35 Stk 1.0% 1.7% 0.8% Holdings Inc Tianjin Tianhai Investment Ingram Micro Inc 6,133 12/31/16 38.90 34.77 Cash 11.9% 19.9% -0.6% Co Ltd ITC Holdings Corp Fortis Inc/Canada 11,150 12/31/16 46.22 44.56 C&S 3.7% 6.2% -0.8% Johnson Controls Inc Tyco International Plc 28,667 09/30/16 39.79 44.10 C/S -9.8% -28.3% -1.3% KLA-Tencor Corp Lam Research Corp 10,955 06/30/16 73.49 72.99 C&S 0.7% 7.3% -0.2% Medivation Inc Sanofi 8,766 - 52.50 60.63 Cash -13.4% 0.0% 0.2% Private Advantage FIC FI Micron Technology Inc 22,973 - 21.00 12.31 Cash 70.6% 0.0% 240.1% ▲ Multimercado Monsanto Co Bayer AG 61,698 - 122.00 109.49 Cash 11.4% 0.0% -3.1% ▼ Piedmont Natural Gas Co Duke Energy Corp 6,536 12/31/16 60.00 59.96 Cash 0.1% 0.1% -0.3% Inc Questar Corp Dominion Resources Inc/VA 5,965 12/31/16 25.00 25.28 Cash -1.1% -1.9% -0.7% Walgreens Boots Alliance Rite Aid Corp 16,708 12/31/16 9.00 7.75 Cash 16.1% 27.0% -1.0% Inc St Jude Medical Inc Abbott Laboratories 30,108 12/31/16 80.97 78.18 C&S 3.6% 6.0% -0.3% TECO Energy Inc Emera Inc 10,361 06/30/16 27.55 27.53 Cash 0.1% 0.8% -0.1% Zoomlion Heavy Industry Terex Corp Science and Technology Co 4,960 05/27/16 0.00 20.89 Cash 0.0% 0.0% -23.4% ▼ Ltd Valspar Corp/The Sherwin-Williams Co/The 11,206 03/31/17 113.00 107.55 Cash 5.1% 6.0% -0.6% Progressive Waste Waste Connections Inc 7,815 06/01/16 68.03 68.15 Stk -0.2% -12.5% -1.2% Solutions Ltd Williams Cos Inc/The Energy Transfer Equity LP 58,093 06/30/16 25.88 21.48 C/S 20.5% 220.0% -4.8% ▼ MARB North American deals *Spread moved by more than 2% of price target: ▲ = up, ▼= down C/S=cash or stock

SPOTLIGHT May 31, 2016 Bloomberg Brief Hedge Funds 11

SPOTLIGHT

Omni Event Fund CIO Melsom Sees Opportunities in European M&A money being put to work again, which We’ve seen a pick up in outbound John Melsom, chief investment officer of the caused spreads to tighten somewhat. investment from China. But it's across $150 million Omni Event Fund, said the fund is sectors really. starting to allocate more capital to Europe after Q: What sectors do you like? seeing an increase in merger and acquisition A: We're fairly sector agnostic. The nice Q: Are you following regional trends? opportunities there. He spoke with Bloomberg thing about the hard catalyst style of A: In Europe, we look at when Brief's Melissa Karsh in a telephone interview this investing is we're not trying to predict the companies refinance. Often it’s through month. His comments have been edited and future in terms of where deals are going rights issues, so there's a trend right now condensed. to be, so we can react to the environment where the European steel companies are as it happens. Inversion or no inversion, all refinancing to shore up their balance we're still seeing a lot of activity in the sheets and those rights issues provide Q: How has your fund performed? medical sector, in the pharmaceutical opportunities for us both on an arbitrage A: We had a pretty big year for M&A last sector and biotech. The problem with and a directional point of view. In Asia, year and managed to capitalize on that. some of the health-care deals is that it's been more sporadic in terms of the We were up about 16.6 percent last year. politics often gets involved and hard catalyst events. In the last 12 So far this year it's more of the same in sometimes that's harder to price risk. It's months in Australia, we've been involved terms of year on year compared to Q1 in hard to know how much of a haircut to in a lot of REIT-type deals. In the U.S. 2015. M&A levels seem to be about the give that. It also leads to wider spreads, the biggest sector has definitely been same. We're down from Q4 in 2015. We which provides opportunity for us. The oil health care. But we focus where the didn't have a great April — we were and gas sector will be interesting this deals are happening as opposed to down about 50 basis points, but we've year. There's a lot of stress in the smaller looking in certain sectors. After a very already made that back and then some exploration-type companies so that could dead period in terms of European M&A so far in May. On the year right now lead to some consolidation there. we're seeing a big pick up, so we’re we're right around 6 percent. starting to allocate some more capital to Q: Wider spreads, how so? Europe. You might also see a further pick Q: What occurred in May to spur the A: Right now you’ve got a big divergence up in European M&A once there's some performance increase? in spreads where the very straight clarity around the Brexit referendum in A: One of our large positions is Baxalta- forward deals are trading at not tight, but the U.K. Shire, so that’s come in significantly. The much smaller annualized spreads. spread widened out over the new rules Anything with a bit of risk is trading much Q: What's your allocation to Europe? from the U.S. Treasury on inversions. wider, but that can provide some A: We’re seeing more opportunities so This isn’t an inversion, but people were opportunities for us. The other thing more capital is flowing into Europe, but nervous of anything that had any kind of we're seeing is an increase in buyers out that was from a very low level throughout non-U.S. buyer. There's also concern of Asia, in particular China. That comes 2011-2012. Right now, we're probably after the Pfizer-Allergan deal fell apart with its own set of risks from a regulatory about 30 percent in Europe, 10 percent that perhaps Shire would become a side, especially when they are buying US in Asia and 60 percent in the U.S. target for one of them, but I think that companies and in sensitive sectors. The Because we're a very liquid fund and fear has now disappeared. So that main one for the U.S. seems to be the most of the activity has been in the U.S., spread has come in. The Recall Holdings- technology sector, so anything where that's nearly always the largest Iron Mountain situation has given us they think they are buying intellectual proportion. The global aspect for us is some profit this month. There was an property, especially any IP that is in good because when we feel like things index reweight in Australia, which some way used for national security, are getting a bit crowded or spreads are allowed us to take a short position in Iron which can cause issues from a U.S. too tight in the U.S. we’ll look to other Mountain at levels quite a bit higher than approval standpoint. geographic regions for opportunities. it’s traded for a long time in the U.S. And those positions are completely fungible. So those deals are the two main contributors so far this month. Birthplace: U.K. Spreads had generally widened a little Based in: Orange County, California in April, in part due to the fact that one of Education: University of Newcastle upon Tyne the largest deals, Allergan-Pfizer, got Hobbies: Skiing, automotive enthusiast effectively blocked by the Treasury. This Favorite vacation spot: Lake Como caused some pain for many merger arbitrage funds, which in turn can cause other spreads to widen. With some big deals closing in May, we started to see

CALENDAR TO SUBMIT AN EVENT E-MAIL [email protected] May 31, 2016 Bloomberg Brief Hedge Funds 12

CALENDAR TO SUBMIT AN EVENT E-MAIL [email protected]

The "organizer" and "event" columns link 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 Connecticut Hedge Fund Role in Asset Allocation and Sarah Samuels, Pension Reserves June 2 Greenwich, Connecticut Association Portfolio Construction Board; David Burke, MKP. Southeast Chapter Cocktail June 2 Hedge Fund Association For more information, contact [email protected]. Miami, Reception June 5-7 Context Summits Context Summits 2016 One-on-One meetings with investors. Arlington, Texas 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 Lending Ian Fowler, Babson Capital; Kal Kilgast, NXT Capital; John June 7 Bloomberg Chicago Forum Chicago Martin, Antares Capital. Adam Blitz, Evanston Capital; John Frede, 50 South; Dianna June 8 Bloomberg Hedge Fund Marketing Forum JW Marriott Chicago Henrich, Grosvenor; Anthony Lombardi, Aon Hewitt. June 8-9 RG+Associates 13th Annual ConsortiumEast Michael Silva, Calpers; Kelly Williams, GCM Grosvenor. New York Anthony Scaramucci, SkyBridge; Michael Kieffer, Kieffer June 15 BattleFin Discovery Day Intrepid New York Capital. Gordon Ritter, GSA Capital; Yin Luo, Deutsche Bank; Matt June 16 RavenPack 4th Annual Research Symposium New York Ober, Millennium Partners. Credit & Hedge Eric Nierenberg, Massachusetts PRIM; James Mnookin, June 21 Markets Group Boston Fund Investor Forum Cambridge Associates; Kamal Suppal, NEPC. Managed Funds Brian Hurst, AQR; Ian Haas, Neuberger Berman; Sandy June 21 Forum 2016 Four Seasons, Chicago Association Rattray, Man AHL; Jackie Rosner, KKR Prisma. Sessions include U.S. and EU regulatory frameworks, Hedge Funds: Regulatory, Risk June 23-24 Storm-7 Consulting business continuity and disaster recovery and 3rd-party New York and Compliance administration. Mitigating Risks Caused by Rogue Paul Neale, DOAR; Mark S. Sidoti, Gibbons; R. Scott Garley, June 28 Hedge Fund Association Harvard Club, New York Employees Gibbons. New York Hedge Fund Maureen Sherry, author of "Opening Belle" and previously of June 30 June Roundtable New York Roundtable, Bloomberg Bear Stearns. 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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