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Tag: Hedge Funds

What Can You Buy For $616 Million? Not Much, If You’re Steven A. Cohen – Money Morning

Steven A. Cohen’s SAC Capital Advisors was one of the biggest, most powerful and profitable hedge funds on Wall Street. Cohen himself is a legendary figure, replete with odd, personal eccentricities that are the hallmark of the truly brilliant.

Famous for spending hours as a younger man watching the tape roll by, and for keeping his Stamford, CT, trading floor at a steady 68 degrees, Steve Cohen made billions for his clients – and himself.

Now the sharks are circling, the dominos are falling – nearly any hackneyed metaphor a writer could think of to evoke a doomstruck sentiment applies.

The SEC and Manhattan U.S. Attorney Preet Bharara have pursued Cohen and SAC Capital with a rare, almost indecent zeal. The charge is insider trading, allegations which Cohen vehemently denies, but which the SEC is pursuing.

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Hedge funds for the masses- Sober Look

Tired of the same boring mutual funds? Want some hedge fund action but don’t have the $5 million minimum initial investment? Now there is a product for you – a mutual fund of hedge funds called the Blackstone Alternative Multi-Manager Fund. Among others, here are the managers to whom your capital would be allocated.

 Two Sigma Advisers
 Cerberus Sub-Advisory
 Credit Suisse Hedging-Griffo Servios Internacionais
 HealthCor Management
 Caspian Capital
 Boussard and Gavaudan Asset Management
 Wellington Management
 Good Hill Partners
 BTG Pactual Asset Management
 Chatham Asset Management
 Nephila Capital

And just like in a typical mutual fund you get daily liquidity, except for those pesky early redemption fees. As far as disclosure, Blackstone doesn’t want the world to know what fee split arrangement it has with these hedge fund managers (sub-advisors) and will only disclose the aggregate fee.

From the SEC filing: – Applicants also request an order exempting the Subadvised Series from certain disclosure obligations that may require each Subadvised Series to disclose fees paid by the Advisor to each Sub-Advisor. 

The portfolio is a mix of strategies including distressed credit, black box equity investing, long/short credit, various emerging markets, structured products, etc. It’s all the stuff that retail investors wanted to know about but were afraid to ask.

Now that institutional investors are not stepping up to hedge fund investing the way they used to, it’s time to tap the retail universe.

Blackstone mutual fund of hedge funds

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A Simple Way For the Average Guy to Have His Own “Hedge Fund” – Money Morning

Setting aside the $2.13 trillion under management, there is a certain mystique attached to hedge funds and the people, like George Soros, Carl Icahn, and John Paulson, who manage them.

At one time, hedge fund managers were counted among the “Masters of the Universe.” Most of the “rich lists” include no small portion of these types.

But all of these big money managers ultimately live or die on performance.

If their fund takes a dive, the manager might not even draw a paycheck. Meanwhile, the wildly successful managers are compensated far and above what the average Wall Street or London über-banker receives.

But this year, the hedge funds have collectively lagged behind the S&P 500 by about 10% according to Goldman Sachs. Analysts there credit this underwhelming performance to overly bear-ish fund managers who like to short stocks like Johnson & Johnson (NYSE:JNJ), only to see the stocks head the other way.

Part of the allure of the hedge fund world is that they are usually open only to “accredited investors,” certain high net worth individuals who meet the criteria, laid out in SEC Regulation D, rules 505 and 506, for investing in hedge funds [emphasis added].

Here are just a few of the criteria:

  • a bank, insurance company, registered investment company, business development company, or small business investment company;
  • a director, executive officer, or general partner of the company selling the securities;
  • a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
  • a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
  • a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

A Poor Man’s Hedge Fund

As for the rest of us, who may not be “accredited investors?” We’re on our own-but not completely.

There are certain ways to taste the rarified air of the hedge fund crowd.

There is an ETF, the Global X Guru Holdings Index ETF (NYSEArca:GURU). Global X’s methodology involves scouring the numerous 13F forms that fund managers are required to file. The fund searches for the best performing holdings among the hedge funds – the managers’ top picks – with the least turnover, and takes you along for the ride. It’s been called the “poor man’s hedge fund.”

GURU has been around a little less than a year, and has beaten the S&P 500 by a respectable 18 percent.

It’s not bad, but their track record is thin on time and the truth is there are ways to do even better…

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Distressed Debt Investing Now a Favorite Move for Hedge Funds – Money Morning

Regulators have demanded that banks stop engaging in so much risky behavior – chiefly, distressed debt investing. And the banks have begun to curtail this type of investing.

But this has led to an unprecedented – though not unpredictable – situation: It seems the hedge funds are picking up the slack.

The distressed debt that banks are leaving behind is getting bought up, in a big way, by credit hedge funds. Fully $108 billion worth of distressed debt investments is being picked up by these groups.

Hedge funds are not as big as the large banks, with assets running “only” into the mid-hundreds of billions. But the more moves they make, the bigger they become.

Hedge funds, money-market funds and REITs – engines of shadow-banking – have exploded recently, in terms of capital and headcount. And top talent – for top dollar – has been leaving companies like Deutsche Bank AG (NYSE: DB) and Barclays Plc (NYSE: BCS) for the greener, riskier pastures of BlueCrest Capital Management and Pine River Capital Management.

Hedge funds are less regulated than banks, because they cater to a savvier investor with different goals than someone who has a run-of-the-mill checking, savings or retirement account. Grandma is not opening up a Christmas Club account for you with the likes of Carl Icahn – yet.

This freer atmosphere makes hedge funds the natural place to turn once you begin to rule out banks. They’ve become “shadow banks,” and they’ve been getting into some pretty interesting areas.

Their investment in bankruptcy claims and distressed debt is of particular note.

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