Remember when the Federal Reserve was going to raise rates next spring? Yeah, well that was fun while it lasted.» Read More
A hedge fund and other out-of-luck bond investors have won a $565 million judgment in a long-running legal saga that accuses large private equity firms of unfairly profiting from a Greek telecom company they set up to fail with piles of debt.
Despite the favorable court ruling filed Tuesday, London-based SPQR Capital and other bondholders of the company still face legal challenges to get PE giants TPG Capital Management and Apax Partners to pay.
At a combative Capitol Hill hearing Thursday over its commodity investing and trading, a Goldman Sachs executive said the firm is in talks with a Russian buyer, among others, about selling its embattled metal warehousing business.
During the hearing, where a feisty Sen. Carl Levin grilled Goldman's higher-ups over allegations they manipulated metal investment rules for profit, hurting aluminum purchasers, the head of Goldman's commodity investment group, Jacques Gabillon, said the firm was in discussions with foreign investors—including at least one in Russia—about potentially selling Metro, its metal warehousing subsidiary.
"We are running a sales process right now and we have a variety of interest from companies in Europe, in Russia and in China," Gabillon said during the question-and-answer portion of the hearing.
The remarks are significant because other transactions between U.S. and Russian companies have been thrown into question amid powerful U.S. and EU sanctions against the country since its annexation of a portion of Ukraine earlier this year.
In a voluminous new report reflecting two years of research, an influential Senate panel accuses Goldman Sachs of manipulating aluminum storage rules in order to line its own pockets, even as manufacturers and customers suffered.
Since 2010, when it acquired the metal storage company Metro International Trade Services, Goldman has engaged in a slew of manipulative "merry-go-round" trades in which aluminum slabs are moved from one warehouse facility to another, says the 396-page report by the Senate Permanent Subcommittee on Investigations, resulting in record U.S. fees for storing and shipping aluminum and, as a result, higher overall costs for aluminum-product manufacturers and consumers.
"These merry-go-round transactions lengthened the metal load out queue to exit the Metro warehouse system [and] blocked the exits for other metal owners seeking to leave the system," states the report, unveiled at 5 p.m. on Wednesday in advance of a two-day hearing set to be held on the subject in Washington, D.C.
Those actions, combined with "extensive aluminum trading" that Goldman engaged in in the aluminum market during that period, the report adds, have "given rise to serious questions about the integrity of the aluminum market."
Early in the week of the report's release, the Senate hearings were already promising to be contentious. In its own 31-page position paper, prepared in advance of the release of the subcommittee's report, Goldman officials defended their actions with Metro and other commodity businesses. "The queues were the result of metal owners' independent, financially-motivated decisions to remove metal that had been placed in Metro's warehouses," the report stated. "Like any other landlord, Metro was merely competing for tenants."
Goldman enhanced its own profits in the physical storage and trading of aluminum, the Senate panel report argues, by purchasing Metro, a longtime warehousing business that stores aluminum, copper, zinc, and other base metals around the U.S.; stacking Metro's board exclusively with Goldman executives; and then striking backroom deals with aluminum owners like the international trading firm Glencore and the London hedge fund Red Kite.
Those deals allowed Metro to remove each client's aluminum from one Metro warehouse and move it shortly thereafter into another—tying up its ground transportation systems and creating substantial delays for other clients wanting to ship metal out of storage.
When companies do reverse splits on their shares, it's often seen as a Hail Mary pass by a stock that's circling the drain. When exchange-traded funds try the same move, it's often cheered.
That's yet another unusual feature of the ETF world, an industry that's rapidly approaching $2 trillion in assets.
There has been a steady stream of reverse splits in 2014, among the most recent being ProShares' announcement that it was performing a 1-for-4 split on 10 of its inverse and leveraged products. While many of the firm's short funds have declined in price since the Oct. 15 reverse splits, that's primarily because the sectors the funds covered have gained with a rising stock market. Conversely, those "short" funds benefit from market declines. Otherwise, the funds have shown little damage from the move.
A normal split sees investors get multiple shares per each they hold. An inverse does the opposite and is often used to prop up flagging prices for a struggling company.
Investors have been withdrawing money aggressively out of bond funds recently, and it's pretty much all Pimco's fault.
In fact, when excluding flows from the Newport Beach, California-based fixed income behemoth, all other bond funds actually have been taking in money, according to calculations from Morningstar that highlight just how pronounced a reaction investors have had to Bill Gross leaving the firm he founded.
In total, taxable bond funds lost $41.8 billion in September and October. When subtracting Pimco from the equation, October's number turns positive by $9.2 billion, the data show.
Billionaire investor Paul Singer has a message for the California Public Employees' Retirement System: Dumping your hedge funds makes no sense.
"We are certainly not in a position to be opining on the 'asset class' of hedge funds, or on any of the specific funds that were held or rejected by CalPERS, but we think the decision to abandon hedge funds altogether is off-base," Singer wrote in a recent letter to clients of his $25.4 billion Elliott Management Corp.
CalPERS, the largest public pension in the country, announced in September that it was axing most of its hedge funds, a $4 billion slate of a $300 billion portfolio, save for those that use a corporate activist strategy.
"Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost and the lack of ability to scale at CalPERS' size, the [hedge fund] program is no longer warranted," Ted Eliopoulos, CalPERS' interim chief investment officer, said at the time.
When it comes to hedge fund reporting, a great deal of ink is spilled covering the moves of highfliers like Third Point, Appaloosa, and Greenlight in the stock market.
But according to a recent survey, the real money on individual stock picking is being made by a host of less well-known funds that have managed to find investment gems even in battered sectors.
Whale Rock Capital Management, Matrix Capital Management, PAR Capital Management, Senator Investment Group, and Starboard Value appear to be the top stock pickers for the fourth quarter so far, according to regulatory filings and performance-based skill assessments conducted by Symmetric, a New York-based research firm.
In determining the current rankings, Symmetric also factored in the consistency of upside over one- and three-year periods, looking for hedge funds that showed impressive stock-investment results at a time when many of their peers were struggling to do so.
After the Republican-controlled Congress sorts out its new hierarchy, and after it gets done battling President Barack Obama over immigration, then will come the time to get some actual work done.
Atop the priority list, at least from a market perspective, will be meaningful tax reform to address some of the thornier issues of concern to corporate America.
With another whiff of change in the air, Wall Street pros are starting to handicap the odds of getting some actual changes in the tax code.
The priorities are to help U.S. companies bring home some of the more than $2 trillion they have parked overseas in an effort to avoid highest-in-the-world corporate tax rates. Doing so would have a two-pronged benefit: Getting some cash that hopefully would be used to grow the economy, and ending the rash of so-called inversions in which companies do deals that allow them to establish domiciles in lower-tax countries.
Bill Ackman isn't the only hedge fund manager who likely made big money on the Allergan deal.
Actavis announced on Monday that it will acquire Allergan for $66 billion, or $219 per share in cash and Actavis shares. The stock had been trading bear $110 earlier this year.
Allergan is one of the most widely held stocks by hedge funds. As of Sept. 30, some 19 percent of hedge funds owned it, according to an analysis of public holdings by data analysis company Symmetric.
The largest holder is Ackman's Pershing Square Capital Management, with $5.14 billion worth of shares (28.8 million) as of Sept. 30. The firm bought the stock at an average price of $127; at the current price, that means a more than $2 billion gain after a profit-sharing arrangement with Valeant. (Ackman had tried to buy Allergan by teaming up with Valeant earlier this year.)
Talk about a big fish in a small pond: Bill Gross cast a long enough shadow at Pimco, something only exacerbated by his move over to Janus Capital.
In September, the so-called Bond King left Newport Beach, California-based Pimco, with its $1.9 trillion under management and the biggest bond fund in the world, for much smaller Janus, a $178 billion firm nestled in a leafy, slow-paced section of Denver.
By now, all of Wall Street knows the ensuing headlines well: Gross departed Pimco under a cloud of controversy, reportedly about to be fired after a two-year stretch of underperformance and investors flocking for the door.
A wave of speculation followed: Was Gross through? Had not only Pimco management but also fixed income investors tired of his eccentric ways, including the cryptic, opaque messages he delivered in monthly letters to clients that only seemed to magnify how he had lost his magic touch when it came to reading the tea leaves of the bond market? Would he be able to regain his mojo?
But while the rest of the investing world was contemplating Gross' demise, folks over at Janus were salivating over the chance to get someone justifiably regarded as an investing legend into the stable.
Remember when the Federal Reserve was going to raise rates next spring? Yeah, well that was fun while it lasted.
Stock-picking fund managers are testing their investors patience with some of the worst investment returns in decades.
A number of tricks used by China's bankers will likely undercut any attempt to measure any change in lending stemming from the PBOC's rate cut.