The surging power of activist investors is bolstered by a growing ally: public pensions and other big institutions.» Read More
The rapid fall of the ruble and stocks on the Moscow Exchange means even more pain for investment managers who have been trying to play Russia, virtually all unsuccessfully.
Mutual funds, designed to bet on price gains in securities, have predictably suffered the most. The Voya Russia Fund, for example, is off more than 43 percent in 2014 as of Monday on bad bets such as energy company Lukoil (down 25 percent), retailer Magnit (down 52 percent), and miner Norilsk Nickel (down 27 percent), according to public holdings as of Sept. 30. The fund has the highest mutual fund exposure to Russia at 76.7 percent, according to data compiled by Morningstar.
Another to suffer is the T. Rowe Price Emerging Europe Fund, which has a second-highest 51 percent of assets in Russia. The fund is down 37.2 percent this year on losing bets such as energy company Gazprom (down 33 percent) and local banking giant Sberbank (down 52 percent).
Another week, another set of wins for activist investors.
On Sunday, pet supply retailer PetSmart agreed to the largest leveraged buyout of the year at $8.7 billion. Hedge fund firm JANA Partners had been pushing for a sale and, with a 9.9 percent stake in the company, appears to be in line for a pay day of about $230 million.
On Monday, enterprise tech company Riverbed Technology said it would sell itself to private equity firm Thoma Bravo for $21 a share. Hedge fund manager Elliott Associates, who also agitated for a sale, owns 9.6 percent of the company, meaning it will likely net about $102 million on the transaction.
Those deals add to the wins by activist hedge funds in 2014. Other notable successes this year include Pershing Square Capital Management's bet on Allergan (which was sold to Actavis and netted Bill Ackman's firm about $2.2 billion); Starboard Value's involvement in Darden Restaurants (it took over the board with all 12 seats, and the stock has gained since); and Icahn Enterprises' play in Family Dollar Stores (the company is in the process of being sold, and Icahn netted a reported $200 million profit).
"Without question, activists and suggestivists have been highlights amid a generally lackluster year for the industry," said Rick Teisch, director of research at hedge fund investor Liongate Capital Management in New York. "Several managers have generated returns far north of equities by pressing lethargic management and/or arming companies with creative ways to enhance shareholder value."
A top hedge fund manager is worried about what the continued low price of oil could mean for the global economy.
"A persistently low oil price could affect producers' ability to maintain domestic infrastructure and in the medium term be a force for geopolitical instability," Sir Michael Hintze, CEO of $14.1 billion hedge fund firm CQS, said in a letter.
Hintze did say that low crude prices would be "broadly-speaking, positive for the global economy." But he noted that the big decline was driven by lower economic growth and not just expanded supply from factors like U.S. shale reserves.
In the short term, the biggest effect will be on indebted oil-producing countries.
Hedge funds are continuing to shut down, but the pace of failures isn't quite as bad as feared.
Some 200 funds liquidated during the third quarter, according to industry data tracker HFR. That brings the total of closed funds to 661 through September, not quite on pace to match the 1,023 that shut in 2009, the previous record outside of the peak of the financial crisis in 2008 when 1,471 funds closed.
The number that shut in the third quarter also represents a slight decline from the same three month period in 2013, when 222 shut. And more funds are starting: HFR data shows that 814 funds have launched this year.
Energy prices are unlikely to rise, with the drop providing a "massive tax cut" for a growing economy, BlackRock's Larry Fink said Thursday.
The head of the $4.6 trillion money manager described his sentiment as "more bearish on energy, more bullish on the world," after a trip to the Middle East recently.
"It's fair to say the oligopoly is confused right now," he said.
Fundamental factors are at play in oil's drop to about $60 a barrel as production for years has been outstripping demand, Fink said at the DealBook conference in New York.
Stephen Schwarzman thinks the drop in energy prices is creating "wonderful, wonderful" options for investors.
"I think this is going to be one of the best opportunities we've had in many, many years," the CEO of private equity giant Blackstone Group said at the DealBook Conference in New York Thursday.
"I think there's going to be a fallout. I can't tell you how big. But I can tell you I like buying things cheaper than more expensive," Schwarzman said of companies being hurt by plummeting oil prices.
Billionaire investor Paul Singer thinks the economic recovery is "unfair" and the Federal Reserve is to blame for growing income inequality.
"[It's an] unfair recovery, a distorted recovery," the founder and president of Elliott Management said at the DealBook Conference in New York Thursday, repeating a previous charge.
Ray Dalio thinks the economy is good for now, but there could be trouble ahead as monetary policy becomes less effective in the developed world.
"It's a good environment," the founder of hedge fund firm Bridgewater Associates said Thursday at the DealBook Conference in New York.
He noted Bridgewater was still holding bets on the appreciation of U.S. stocks.
But in a year or two, Dalio noted, the "effectiveness of monetary policy will be less" and that could lead to less buffer against an economic hit.
"Whenever there might be a need for easing of monetary policy, we're going to be in a situation in which the effective ability to ease is very limited. And that's at the same time that asset prices will be comparatively high."
Lower oil prices are an unquestioned positive for the U.S. economy, Treasury Secretary Jack Lew said Thursday.
Speaking at the DealBook "Opportunities for Tomorrow" conference in New York, Lew said the plunge in energy and accompanying prices at the pump that have dropped well below $3 a gallon in most places have helped boost a U.S. economy that is doing well otherwise.
"Short-term we're seeing a U.S. economy that's growing with increasing strength, and lower energy prices are going to be a boost to consumer demand and confidence," he said.
He said the decline is "like a tax cut to the economy" and praised U.S. oil production as a "great success story."
Lew would not predict the future path of oil prices. He did say that forward cpntracts indicate that market conditions indicated the price would "trend back towards normal."
In other issues, Lew expressed some willingness to compromise on the latest spending battle raging in Washington.
Lloyd Blankfein thinks the economy is on the right track even though it's about to be overtaken by China.
"There are a lot of positives to the economy," the CEO and chairman of Goldman Sachs said at the DealBook Conference in New York Thursday.
He noted falling energy prices, an improving housing market, and lower leverage in the system.
The surging power of activist investors is bolstered by a growing ally: public pensions and other big institutions.
Crude oil futures fell sharply, signaling traders that the selling is not over.
The Fed gave banks more time to meet a provision in the Volcker rule that bans them from betting with their own money through investments in risky hedge and private equity funds.