September 16, 2016

Weekly Roundup September 16, 2016

Legal & Compliance News

“Managers want to build sustainable businesses and investors want the right kind of performance at a fair price. These are the interests that are being ever more closely aligned.” [AIMA]

Amidst questions of the legality and effectiveness of the Dodd-Frank regulatory regime [Reuters; Brookings Institution] and efforts to dismantle it [Wall Street Journal], conservative think-tank The Heritage Foundation suggests that eliminating the bankruptcy safe harbors for derivatives would force users to adequately account for their risks. [Heritage Foundation] Separately, the debate about the Commodity Futures Trading Commission’s new swaps rules continued at the confirmation hearings for two nominees to the regulator. [Reuters]

The U.S. House of Representatives passed a bill that would ease several hedge fund regulations [Hedge Fund LCD]—with the backing of Rep. Jim Himes (D-Conn.), who represents Greenwich and the hedge fund-heavy southwestern corner of the state. [Connecticut Post] The proposal now goes to the U.S. Senate—although President Barack Obama has vowed to veto similar measures in the past. [Congress]

California Gov. Jerry Brown has signed into law a controversial bill requiring greater disclosure from hedge and private equity funds managing money for public pension funds. The law was opposed by a number of state pensions, who fear it will cause top firms to drop them as clients. [Chief Investment Officer] Still, the state’s second-largest public pension, the California State Teachers’ Retirement System, hopes to increase its hedge-fund allocation by as much as $8.7 billion over the next three years. [Bloomberg]

Be prepared to explain your firm’s hiring of individuals with a history of disciplinary events during your next Securities and Exchange Commission examination. [SEC]

Armed with new ammunition following the recent arrest of an African business fixer, federal prosecutors appear poised to hold individuals at Och-Ziff Capital Management responsible for alleged bribery by the hedge fund. [Financial Times] Meanwhile, the firm said a federal judge had ignored his own deadline in certifying a class-action against it for allegedly misleading shareholders about the African probe. [Reuters]

The Ninth Circuit Court of Appeals has signed off on a new independent cause of action allowing the SEC to sue CEOs and CFOs who certify false or misleading statements. [Lexology]

A former portfolio manager has accused Highland Capital Management of ripping off clients—an allegation that the litigious hedge fund was quick to return. Joshua Terry is seeking to force Highland into arbitration for improperly firing him, while Highland has asked a court to prevent him from disclosing confidential information—which it says he got by improperly recording conversations with colleagues and investors. [Dallas Morning News]

Chinese restrictions on high-speed trading and short selling are turning the country’s hedge funds into mutual funds. [Reuters]

“One of the most difficult tasks in developing the right regulatory response to such potentially disruptive trading strategies [as high-frequency trading] is the need to avoid undue interference with practices that benefit investors and market efficiency.” [SEC] But SEC Chair Mary Jo White said the regulator is moving forward with plans to finalize dark-pool disclosure rules by the end of the year. [WSJ]

Open-ended funds have come to Hong Kong. Here’s how to set one up. [Mayer Brown]

The emissions scandal at Volkswagen could revive hedge funds’ efforts to hold Porsche accountable for its failed attempt to acquire VW in 2008. [Reuters]

“I’ve been assured suing the government, or poking the bear… would be a completely futile endeavor.” [Wall Street Journal] But Level Global Investors co-founder David Ganek, whose firm folded following a Federal Bureau of Investigation raid, did it anyway. “There needs to be transparency here. My objectives for doing this first are about accountability.” [CNBC]

Corporate monitor Guidepost Solutions hired a former top New York State Department of Financial Services official, Daniel Burstein. [New York Times]

 

Interlude

Hate the idea of accidentally creasing a spine, or getting skin oils onto the pages of the latest James Patterson? MIT and Georgia Tech scientists have allowed you to read them without ever cracking the cover. [PBS]

Already able to tell a ’61 Chateau Haut Brion from a ’59? Know from the nose which part of the vineyard that Stags’ Leap comes from? You might be ready for some classes on interpening, that is, learning the complexities of marijuana’s unique aromas and how best to pair the right buds with the right food. Plus, the courses are cheaper than a vintage Chateau Lafite Rothschild. [Quartz]

 

Hedge Fund Industry News

Hedge fund fees are falling, as managers offer discounts to attract clients. [Fortune] Some three-quarters are currently offering or considering a sliding scale for fees as assets rise, [Financial Times] while nearly all now have high-water marks. Only one-third use hurdles, according to the Alternative Investment Management Association. [Pensions & Investments] AQR Capital Management’s Clifford Asness endorses better links between fees and correlation to the broader markets, a “wildly unpopular” idea among his peers. [Investor Daily]

“Against a backdrop of comparatively sclerotic growth, S&P 500 valuations stretched on numerous metrics, and alongside approximately $10 trillion of negative-yielding debt, it is reasonable to conclude that the alternatives industry is inappropriately sized to deliver on clients’ return expectations.” [Bloomberg]

Bridgewater Associates may be cutting staff [see below], but it’s growing assets: The world’s largest hedge fund has taken in $22.5 billion for its new Optimal Portfolio, which debuted last year, [Bloomberg] and has reopened its flagship Pure Alpha fund for the first time in seven years. [Wall Street Journal]

Perry Capital’s assets under management have plunged 60% to just $4 billion, following losses in each of the past three years. [Bloomberg] Paulson & Co.’s assets are also down, by 15%, this year, as is Och-Ziff Capital Management’s, by almost 14%. [Bloomberg]

Family offices are returning to their roots, increasingly favoring private equity over hedge funds. [Campden Wealth]

Placement agency Park Hill Group and private equity fund White Oak Equity Partners will team up to help smaller hedge funds sell stakes in themselves. [Bloomberg]

It’s taking BlueCrest Capital Management longer than expected to unwind its portfolio, frustrating clients of the liquidating firm. [Reuters]

Liquid alternatives funds have been remarkably resilient in holding on to assets. Perhaps until now, that is. [New York Times]

A reinsurer with close ties to embattled hedge fund Platinum Partners bought some of that firm’s illiquid assets—and didn’t tell its clients. [Wall Street Journal]

Hedge funds are taking in cash this month, according to the SS&C GlobeOp Capital Movement Index, which rose 0.38%. [press release]

Wells Fargo—embroiled in a fake account scandal—will sell its fund administration business to SS&C Technologies. [Reuters]

“There’s a massive exodus from Connecticut” of hedge fund managers fleeing the state’s high taxes for Florida. The most recent snowbirds include Tudor Investment Corp.’s Paul Tudor Jones and Starwood Capital Group’s Barry Sternlicht. [Reuters]

Launches: ex-Farallon Capital Management MD readies Lodbrok Capital, hires four [Bloomberg]; former Valeant Pharmaceuticals analyst launches Ohoco Investment with $75 million [Wall Street Journal]; BlackRock launches $200 million event-driven hedge fund run by ex-Harvard University endowment manager, seeded by New Zealand sovereign wealth fund [Bloomberg]; CQS Asset Management, BlueGold Capital Management veterans seek $100 million for new energy fund [Reuters]; Dutch pension hedge fund chief plans sustainable alternatives firm ARC Fiduciary [Institutional Investor]; TPG Growth eyes $1 billion for new social impact fund [New York Times]; JPMorgan Chase unveils actively-managed hedge-like exchange-traded fund [Financial News]

Liquidations: Two-year-old Pinyin Capital Management closes amidst losses, exit of seeder [Bloomberg]

Returns: SS&C GlobeOp Hedge Fund Performance Index +0.73% August [press release], Eurekahedge Hedge Fund Index -0.06% August, +2.5% YTD [HedgeWeek]; Dorset Energy Fund +64% YTD [Investopedia]; CQS Asset Management Directional Opportunities Fund +4.7% August. +18.3% YTD [Financial News]; Renaissance Technologies Institutional Equities Fund +14.44% YTD [Investopedia]

People Moves: Bridgewater Associates plans layoffs in “renovation” of world’s largest hedge fund [Bloomberg]; Winston Holt leaves Maverick Capital for Electron Capital [Business Insider]