Davidson Kempner continues to make money by focusing on beat up loans—despite the general perception that bonds have little to offer investors.» Read More
Happy Friday. Investor alert: The Morning Six-Pack is not subject to momentum selling.
On the other hand, the mo-mo stocks are getting absolutely crushed, and this could morph into something pretty ugly by the time it's all over. (Wall Street Journal)
In discussing their marriage of interests for the first time on Thursday, activist investor Carl Icahn and eBay chief executive John Donahoe name-checked a particular matchmaker for special credit: Jimmy Lee, a longtime banker at JPMorgan Chase.
There was just one awkward thing: JPMorgan wasn't the banker of record on the shareholder battle. Goldman Sachs, which had been hired earlier this year to advise eBay on handling Icahn's attack, was.
Earlier Thursday, eBay issued a surprise press release announcing an end to an ugly battle with Icahn, who had built up a large position in the online auctioneer and was demanding a spinoff of its payment-processing company, PayPal, and the addition of two candidates he had selected to eBay's board.
Along the way, Icahn had called out Donahoe for demonstrating "inexcusable incompetence" and eBay had criticized Icahn for airing accusations that were "false and misleading." As part of a newly-inked agreement, however, Icahn was withdrawing both demands before eBay's upcoming annual meeting in exchange for naming telecom industry veteran David Dorman as an independent director to the auctioneer's board. And apparently, eBay had Lee to thank for the amicable settlement.
Recent strong demand for relatively risky bonds adds to the case that investors are reaching for yield, meaning they are willing to bet more on lower returns in the absence of other options.
Prominent hedge fund firms Och-Ziff Capital Management, Fir Tree Partners, Perry Capital, Paulson & Co., and Brigade Capital Management each bought more than $100 million of new Puerto Rican municipal bonds in March, according to The Wall Street Journal.
The U.S. territory is seen as one of the riskiest municipal bond markets in the world, and its rating was cut to junk status earlier this year. The 21-year bonds originally were sold at a yield of 8.72 percent,which has risen to 8.84 percent according to the report.
Greece also raised more than $4 billion on bonds in a Thursday auction. Thanks to strong demand, the five-year bonds were priced to yield 4.95 percent—sharply lower than initial estimates of 5.25 percent to 5.5 percent, according to the Journal.
Recent turmoil around megabond fund manager Pimco has been "like a near-death experience," firm's founder Bill Gross says.
Significant underperformance coupled with the exit of high-profile CEO Mohamed El-Erian caused Gross to re-evaluate the way he was running the firm, which manages nearly $2 trillion for clients and runs the world's largest bond fund, the Pimco Total Return, which has assets of $232 billion.
"People have different impressions of themselves, and where reality lies is somewhere in between," Gross told Bloomberg Businessweek in a profile slated to hit newsstands Friday. "And maybe I hadn't been forced to be in between. I always thought of myself as being part of a family and sharing and, yes, leading, but not forcing people to do anything.
Surprise, surprise: Low-key investment funds that diversify their portfolios across asset classes to protect them for the long term are again proving their value.
So-called "risk parity" funds—run by prominent investment firms like Bridgewater Associates, AQR Capital Management and Invesco—are up an average of 3.3 percent through March, according to data from Morningstar, easily beating returns for stocks and bonds. That also is better than a classic 60-40 percent stock-bond allocation, which gained 1.87 percent in the first quarter.
Risk parity is a strategy that holds steady investments in stocks, bonds and commodities that in theory will make money in any economic environment, including inflation or deflation, in cases of either high or low growth. Bonds in the portfolio are often modestly levered to increase their return, which can help make up for equity market losses. The basic diversification idea is a time-honored one: You can't predict the market, but you can predict what assets will do well in different environments.
Bridgewater founder Ray Dalio pioneered the idea to manage his fortune, and his firm launched its risk parity fund for external investors in 1996. Most other funds were created following the financial crisis.
The problem is that investors are getting out of the funds following average losses of 0.01 percent in 2013—and worse at several major firms. Morningstar estimates that $1.45 billion of investor capital has been pulled from risk parity funds in 2014, bringing capital in the previously fast-growing strategy to $11 billion as of March 31.
Happy Wednesday from the crew (of one) at the Morning Six-Pack, where we're always buying the dips.
So this guy walks into his doctor's office ... and finds out his doctor is making $21 million. Ouch. (The New York Times)
Investors give and investors take away, and nowhere has that been more true lately than in value stocks.
Last year's 30-percent stock market rally was powered largely by value stocks—those with low valuations that investors believe can jump higher—that looked like they had nowhere to go but up.
Almost on a dime, however, that belief has changed in recent trading days, with investors looking to put their money elsewhere as growth stocks—health care and biotech are two of the current hot hands—gain preference.
A nearly 30-year employee of the Securities and Exchange Commission used his recent retirement party to deliver a stinging criticism of his agency being too "tentative and fearful" of prosecuting senior executives on Wall Street following the financial crisis, according to a report.
James Kidney, who joined the SEC in 1986 and retired this April, said the SEC has become "an agency that polices the broken windows on the street level and rarely goes to the penthouse floors," according to the Bloomberg report.
Kidney said his superiors were "more focused on getting high-paying jobs after their government service than on bringing difficult cases," according to the report.
Bridgewater Associates, the largest hedge fund firm in the world, has posted modest, positive returns this year as others that bet on macroeconomic trends have faltered.
Bridgewater's largest hedge fund, Pure Alpha II, fell 0.41 percent in March but is up 2.36 percent over the first three months of the year, according to two sources with knowledge of the performance. Pure Alpha I, a similar strategy that is designed to be less volatile, also fell 0.24 percent in March and gained 1.59 percent in the first quarter.
Bridgewater's Pure Alpha funds bet on dozens of different global markets at once, including stocks, bonds, interest rates and currencies.
The winning percentage for all bets in March was 55 percent, according to an investor in the fund. The largest winner for the month was developed market currencies, which gained 0.40 percent. The fund also gained 0.20 percent on stocks. Losers for the month included emerging market currencies (down 0.30 percent) and commodities (down 0.20 percent), according to the investor. Most other bets were "flat," meaning they did not gain or lose much money.
Five months after a groundbreaking criminal settlement with the U.S. attorney for the Southern District of New York that turned it from a major hedge fund into a private family office, Point72 has hired a former prosecutor from that office to handle internal surveillance.
Point72's new hire, Vincent Tortorella, begins work Tuesday, according to an internal memo issued by company President Tom Conheeney on Tuesday morning.
Tortorella's hiring, the memo states, is part of a broader effort at the family office, which manages company head Steve Cohen's own money alongside that of certain employees and family members, to "heighten our emphasis on surveillance and to add someone with outstanding investigative skills, preferably honed in law enforcement, to lead this effort."
Hedge funds have seen the worst start to the year since the financial crisis, as returns in January and March were both in the red.
The Fed indicated to Citi that it would get more time to fix "stress test" planning problems before rejecting its capital plan.
Goldman Sachs reported quarterly earnings and revenue that topped analysts' expectations on Thursday.