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  Wednesday, 18 Feb 2015 | 7:00 AM ET

How to invest like a hedge fund whale on the cheap

Posted By: Jeff Cox
Carl Icahn
David Grogan | CNBC
Carl Icahn

Hedge fund investing is expensive, but following what the big-name managers do is not.

Such is the premise of "clone" funds, a small but growing sector of the market in which managers track what the best names in the hedge industry—think Leon Cooperman, Carl Icahn or David Tepper—are doing via the 13f disclosure forms they must file with the Securities and Exchange Commission.

Rather than fork over the infamous 2-and-20 fee structure that hedge funds use, investors can pay exponentially smaller sums to get in the clone exchange-traded funds.

Returns for the most part are unspectacular—but so are those for the hedge fund industry in general—and they have their share of detractors. Critics point out, for instance, that 13f filings are backward-looking and do not include short positions.

However, adherents believe clones are a great way for investors to get access to picks of some of the world's top investors without having to incur the costs or do the legwork.

»Read more
  Friday, 13 Feb 2015 | 1:32 PM ET

7 companies getting hammered by rising dollar

Posted By: Jeff Cox

U.S. dollar strength has helped drive down commodity prices, given consumers more purchasing power and generally helped firms that do most of their business within the country.

However, the strengthening greenback is taking its toll elsewhere, according to an analysis this week from Goldman Sachs.

"Companies most exposed to international sales faced negative currency impacts on revenue and (earnings per share)," Goldman said in a report that looked at the impact multiple variables are having on corporate health this year. "Even with hedges in place, managements predict this trend will continue in 2015. Companies that also incur significant costs in non-U.S. locations witnessed an offset to lower revenue on the bottom line."

Broadly, conference calls during fourth-quarter earnings season showed CEOs optimistic due to lower oil prices, related consumer strength and accelerated growth in the housing market.

Posing the biggest threat to that scenario, however, was expected continued currency strength as the U.S. economy grows faster than its global counterparts and the Federal Reserve prepares to tighten monetary policy through increasing interest rates.

The dollar index, which measures the greenback against a basket of global competitors, has risen 15.2 percent over the past six months. The dollar is up 14.3 percent against the euro and 15.9 percent against the yen during the same period.

Goldman's analysis focused on seven firms and their own assessment of currency impacts:

»Read more
  Friday, 13 Feb 2015 | 10:15 AM ET

The Drexel collapse, 25 years later

Posted By: Lawrence Delevingne

Drexel Burnham Lambert, the investment bank famous for high-yield or "junk" bonds, filed for bankruptcy on Feb. 13, 1990 after several years of legal troubles.

Drexel's bond department head Michael Milken would pay huge fines and serve nearly two years in prison for securities fraud. But many would come to see Milken and Drexel as more benign figures.

The high-yield bond market they pioneered increased dramatically in size, and well known entrepreneurs like casino magnate Steve Wynn, telecom boss William McGowan and media mogul Ted Turner were boosted early on Drexel-assisted financing. Milken also became a prominent philanthropist and supporter of public health and medical research.

»Read more
  Thursday, 12 Feb 2015 | 6:36 PM ET

Ackman: This is the best trade in capital markets

Posted By: Lawrence Delevingne
Bill Ackman
Kerima Greene | CNBC
Bill Ackman

Hedge fund mogul Bill Ackman has extremely high conviction on what was a losing trade for him last year: the stock of housing giants Fannie Mae and Freddie Mac.

"It's the most interesting risk-reward that I'm aware of in the capital markets right now," Ackman said Thursday at the Harbor Investment Conference in New York, a charity event he organized.

Ackman positions in both stocks were some of the few losers in his portfolio last year.

Read More What's up with Miami's condo conundrum?

Fannie Mae and Freddie Mac share prices declined 32 percent and 29 percent, respectively, in 2014.

Ackman recommended owning common stock over preferred shares.

He said Congress would eventually stop taking all profits from Fannie and Freddie and let them recapitalize through private markets.

Read MoreSummers: Why the Fed should not raise rates

He also warned that the current status of the GSEs, or government sponsored entities, was dangerous; a "slight downturn" in the markets could cause another taxpayer-led bailout.

He said it was politically unrealistic to eliminate the 30-year mortgage, long a tradition in the U.S. and the core of the GSE business.

»Read more
  Thursday, 12 Feb 2015 | 12:05 PM ET

Yikes! Here's another reason to fear US stocks

Posted By: Jeff Cox
Trader on the floor of the New York Stock Exchange.
Getty Images
Trader on the floor of the New York Stock Exchange.

Deep-pocketed investors believe U.S. stocks will be the best place to put money this year. So far, they've been wrong.

In fact, the domestic market has underperformed most other global indexes, particularly those in Europe and Asia, as the U.S. Federal Reserve gets set to tighten monetary policy while its global counterparts are opening the spigots.

The S&P 500 is up just 1 percent in 2015 while the Dow Jones industrial average has gained 0.4 percent and the Nasdaq tech index is up 1.9 percent, as of Thursday midday trade.

Other indexes around the globe, however, have posted much stronger gains. In Asia, Japan's Nikkei 225 is up 3 percent; Hong Kong's Hang Seng has risen 3.5 percent; and stocks in India are up about 5 percent. European equities, boosted by the European Central Bank's commitment to U.S.-style quantitative easing, are up even more. Germany's DAX has jumped 11.6 percent, Italy's main stock index is up 10.7 percent and the U.K.'s FTSE 100 has climbed nearly 4 percent.

Still, investors responding to a recent survey by Legg Mason say the U.S. is the place to be.

Fully 85 percent of the 458 respondents that Legg Mason called "affluent U.S. investors" believe that the U.S. markets "offer the best opportunities over the next 12 months" compared to other global options. That's up from the 74 percent who predicted—correctly—that the U.S. would be the best market in 2014. In the aggregate, portfolios remain tilted to equities and virtually unchanged over the past few years.

»Read more
  Thursday, 12 Feb 2015 | 12:56 PM ET

Hedge fund fight! UK riled up over tax rate on 1%

Posted By: Lawrence Delevingne
Labour leader Ed Miliband speaks to an audience at Haverstock school in Camden on February 12, 2015 in London.
Getty Images
Labour leader Ed Miliband speaks to an audience at Haverstock school in Camden on February 12, 2015 in London.

Hedge funds and the amount of taxes they pay are center stage in U.K. politics right now.

The liberal Labour Party has slammed its conservative Tory rivals for being "bankrolled" by wealthy hedge fund managers, which they say is essentially a tax-avoidance play by ultrawealthy investors.

Labour claims that managers were given a big break by conservatives when they repealed a tax on certain investment funds. They also said hedge funds exploit a "loophole" by using derivatives to avoid paying a "stamp tax" on U.K. stock purchases.

The liberals also note that 27 of the 59 wealthiest hedge fund managers in the country are conservative donors or work for firms that are.

"This is a PM," Labour leader Ed Miliband said recently of conservative Prime Minister David Cameron, "who won't tackle tax avoidance for the simple reason that too many of his friends would get caught in the net. They're the party of Mayfair hedge funds and Monaco tax avoiders."

»Read more
  Wednesday, 11 Feb 2015 | 12:36 PM ET

A big part of the market is headed for the rocks

Posted By: Jeff Cox
Pedestrians walk in front of Goldman Sachs Group's headquarters in New York.
Victor J. Blue | Bloomberg | Getty Images
Pedestrians walk in front of Goldman Sachs Group's headquarters in New York.

Bank stocks have had a tough start to 2015 and could face even more difficult sledding should current conditions hold up.

Analysts have soured on the sector amid anticipation that interest rates are going to stay lower than many in the market had expected, and as the regulatory vise tightens on those banks considered a danger to the financial ecosystem and the economy as a whole.

Financial services firm Keefe, Bruyette & Woods warned clients in a recent report that unless government bond yields rally in a meaningful way, it will be hard for many banks to shake off the current doldrums.

»Read more
  Thursday, 12 Feb 2015 | 2:04 PM ET

Beware an art market bubble, Roubini warns

Posted By: Jeff Cox
Nouriel Roubini
Jin Lee | Bloomberg | Getty Images
Nouriel Roubini

Economist Nouriel Roubini believes it's time for investors to consider art an asset class, just like stocks, bonds and commodities.

However, the renowned "Dr. Doom" issues a warning with that consideration: There's reason to believe that there's so much interest in what he calls an "extremely large" market with a possible valuation of $70 billion that a bubble is forming.

In a report the head of Roubini Global Economics sent to clients, he cautions that while there is potential for "significant" returns, the nature of the business—in which "art fairs have become big business," and "private banks and financial institutions" are offering art-related services—is that it's ripe for overheating:

There is a lack of a fundamental pricing model for art.

This lack of a fundamental pricing model means that art is subject to fads, fashions, manias—and potentially bubbles. (Markets sometimes run into major challenges even when assets have fundamental pricing models—let alone without them.)

»Read more
  Wednesday, 11 Feb 2015 | 10:23 AM ET

This woman is rocking the hedge fund world

Posted By: Lawrence Delevingne
Leda Braga, who manages Systematica Investments' BlueTrend fund.
Source: BlueCrest
Leda Braga, who manages Systematica Investments' BlueTrend fund.

The most powerful woman in hedge funds is off to a red-hot start at the helm of her own firm.

Leda Braga—who launched Systematica Investments in January after years under prominent European hedge fund firm BlueCrest Capital Management—steered her $7.6 billion flagship BlueTrend fund to a 9.52 percent gain net of fees last month, according to a private performance update sent to investors.

BlueTrend won mostly on unspecified bond bets, according to the letter. Much smaller returns came from correct interest rate plays, stocks and energy-related securities. BlueTrend lost a small amount on currency bets over the week of Jan. 10, the same period when a surprise Swiss National Bank policy move sent its currency soaring versus the euro and U.S. dollar, and burned many investors in the process.

But the firm more than made up that weekly foreign exchange loss with wins on bonds and stocks.

BlueTrend uses a "managed futures" strategy, meaning it trades the futures contracts of stocks, bonds, currencies and commodities and looks for trends in the movements of their prices—so-called trend following. The strategy was among the best performing in hedge funds last year.

Read MoreThis trend following hedge fund absolutely killed it in January

»Read more
  Tuesday, 10 Feb 2015 | 2:52 PM ET

Leon Cooperman bullish despite fund loss

Posted By: Lawrence Delevingne

Billionaire investor Leon Cooperman is still bullish on stocks despite a rare losing streak.

"We believe that the in-place U.S. equity bull market should last for quite a while longer, deliver moderate (high-single-digit) total returns rather than the strong double-digit returns of the past three years, be more volatile than in previous years and have greater breadth," the founder of hedge fund firm Omega Advisors wrote in a recent letter to investors obtained by ValueWalk.

Cooperman, who usually has a relatively positive bent on the markets, also wrote that he wasn't overly concerned about the looming increase in interest rates.

"The upcoming rate hike ... has been well telegraphed by the Fed and debated ad nauseam by investors," he explained. "We therefore expect it to have minimal, if any, impact on financial markets. One could even argue that it will be met with a degree of relief, as investors bear witness to its irrelevance."

»Read more

About NetNet

  • NetNet is where you'll find the low-down and the high jinks of Wall Street. It's the place for insider stories, trader gossip, and tales of the foibles of the moneyed crowd and the culture of finance.Wall Street news and commentary served fresh all day long.

 

  • Jeff Cox is finance editor for CNBC.com.

  • Lawrence Develingne

    Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.

  • Stephanie Landsman is one of the producers of "Fast Money."

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