One of the mysteries of the post-financial crisis world is why the U.S. has lacked inflation despite all the money being pumped into the economy.» Read More
Common Sense Investment Management has poached another Société Générale executive as it continues to rebuild after the arrest of its founder in a prostitution sting and the loss of most of its clients.
Common Sense, a fund of hedge funds based in Portland, Oregon, is set to announce the appointment of Marc Lorin as its president. Lorin was a senior director at SocGen derivatives brokerage unit Newedge, where he worked from 1994 until earlier this month (the French bank finalized the acquisition of Chicago-based Newedge in May).
"Common Sense—our brand and product suite—is evolving, leveraging from our 23 years of history and simultaneously looking to the future of alternative investments. The management team has been structured to underline new governance; we are hiring, and will continue to hire, industry veterans," new Common Sense CEO Jonathan Gane, another Newedge veteran, said in an email addressing Lorin's new role.
"Our newly formed advisory board will provide guidance as we expand our product offer and build bespoke solutions for institutional clients. We look forward to announcing more news in the coming months."
Lorin and his team were responsible for selling Newedge products to hedge fund managers and institutional investors—including funds of funds.
"Having worked with Marc for a number of years as a colleague at Newedge, we are very excited for him, and his future at CSIM," Duncan Crawford, global head of alternative investment solutions at Newedge, said in an email. "He joins a strong leadership team there and the firm appears poised to do some exciting things."
All those headlines about new stock market highs may look sexy, but life for active managers hasn't been quite so much fun.
In fact, running large-cap mutual funds has been a rough business, with about 80 percent underperforming the S&P 500 in 2014, according to S&P Capital IQ Fund Research. That's four out of five managers who've failed to match a simple stock market index fund that usually has lower fees and other advantages.
There are a handful of explanations for why performance has been so weak this year, but at the core seems to be the general and stunningly persistent belief that the market remains ahead of itself, with danger always right around the corner. Fear of a looming correction has kept many investors playing defense.
"We've gone 35 months without a decline of 10 percent or more, and the median since World War II is 12 months," said Sam Stovall, S&P's chief equity strategist. "Everybody seems to be waiting for that all-elusive correction, when everyone will pile in. But if everybody's waiting for it, it won't happen."
Investors who don't have money with Pershing Square Capital Management are likely salivating at the hedge fund's industry-leading 26 percent return from January through July.
But investing with Bill Ackman and other top-performing managers after a great run is probably a bad idea, according to a new study of long-term hedge fund industry performance.
A white paper by Commonfund, which manages nearly $25 billion for close to 1,500 endowments, pensions and other institutions, shows that putting money with the hottest hedge fund managers can work in the short term, but that sticking with them for three years or more is worse than picking managers at random. Picking up losing hedge fund strategies can even produce slightly positive performance.
"Not only does positive-return persistence tend not to work as a selection strategy, but it is especially ineffective in the medium-to-long-range horizons that institutional investors may prefer, and indistinguishable from a strategy of selecting losers," authors Kristofer Kwait and John Delano wrote.
Kwait and Delano found that picking winning hedge funds produced returns of 13.29 percent after 18 months, versus an average of 10.62 percent for all funds. But the same group held for 36 months gained the same as the average; over 48 and 60 months, they rose just 9.49 percent and 8.48 percent, respectively.
A test program to change the way small-company stocks are traded could slow high-frequency action, though some market participants worry that the initial steps are too tepid.
The Securities and Exchange Commission announced the proposal Tuesday in which 1,200 small-cap firms will be divided into three equal-sized groups with different standards governing each. (Read the whole report here.)
One group—the "control"—essentially would trade the same as before; the second would see stock prices quoted in 5-cent increments, as opposed to the penny increments currently used; and the third also would trade in 5-cent increments but also would follow a "trade-at" requirement in which trading centers couldn't match prices unless they display the best bid or offer.
Ostensibly, the program's goal is to "enhance market quality for smaller capitalization stocks for the benefit of investors and issuers," according to the SEC. More practically, the changes are aimed at thwarting high-frequency traders who have used the lightly traded small-caps to skim profits by getting lower prices on purchase and higher prices on sales than their slower competitors.
Wall Street firm Jefferies is providing major backing to a former senior SAC Capital Advisors executive despite its own struggle with insider trading at an internal hedge fund.
On Friday, public conglomerate Leucadia National Corp., which bought $43 billion New York-based investment bank Jefferies in November 2012, announced plans to invest $400 million in Folger Hill Asset Management and that CEO Richard Handler and President Brian Friedman would join the new hedge fund's board of managers.
Set for launch in early 2015, Folger Hill is led by Sol Kumin, who was chief operating officer of Steve Cohen's SAC from 2008 to January 2014. Kumin, who helped develop the firm's international offices and recruit its many traders, was never accused of wrongdoing during his tenure at SAC since 2005. But the firm pleaded guilty last year to criminal insider trading, and eight employees were convicted or pleaded guilty to similar charges. SAC is now a family office for billionaire Cohen and renamed to Point72 Asset Management.
Jefferies made the Folger Hill investment despite one high profile brush with insider trading. The co-portfolio manager of an internal hedge fund, Joseph Contorinis, is serving a six-year federal prison term in West Virginia for making millions of dollars based on nonpublic information about supermarket company Albertsons leaked to him by a UBS banker in 2005 and 2006. He was found guilty in 2010.
The Jefferies Paragon Fund was co-managed with Contorinis by then-CEO Handler's brother Michael, who was never accused of wrongdoing. Michael Handler had been an SAC portfolio manager before joining Jefferies. The then-$70 million Paragon fund was liquidated in June 2007 and Michael Handler is now in public service as the director of administration for the city of Stamford, Conn.
Hedge funds that bet on corporate shake-ups have been the industry's darlings.
The average "event driven" fund clocked in gains virtually every month for the past year and investors poured in tens of billions of dollars into money managers who promised continued profits. A subset, so-called activist managers who actively push for change versus just predict it—like Bill Ackman of Pershing Square Capital Management and Nelson Peltz of Trian Fund Management—produced large gains for investors by practicing their signature public battles with management teams.
Then came July, when U.S. equity markets gave back some of their gains. The average event driven manager lost 0.85 percent for the month, the worst performing hedge fund strategy measured by data provider Preqin. It was also the first monthly loss for event driven strategies since August 2013.
Dan Loeb's Third Point Offshore fund fell 1.2 percent in July, likely on losses in public portfolio holdings like Sotheby's and AIG. John Paulson's Paulson Advantage lost 4.49 percent for the month in part because of positions in companies that had just reorganized and the health-care industry, according to a letter to investors. And Mick McGuire's Marcato International dropped 2.4 percent because of losses in public positions in NCR Corp. and Life Time Fitness, according to a person familiar with the situation.
But investors are far from panicked and continue to believe in a strong environment for profiting off company mergers, reorganizations and other moves.
Wall Street banks may appear to be offering higher salaries to junior employees, but the increase may not be as generous as it looks.
However, banking analyst Dick Bove said there actually may be less than meets the eye to the news, at least in terms of how much big Wall Street financial institutions actually will be spending on employee compensation.
"What they may actually be doing is shifting long-term compensation awards to salaries. Immediate payments may be rising while bonuses and deferred stock awards go down," Bove, the vice president of equity research at Rafferty Capital Markets, said in a note to clients. "Thus, overall compensation may not be changing at all."
Investors may be warming up to the stock market, but they're taking the safe way in.
Passively managed funds are all the rage now, with market participants enjoying their low cost, high liquidity and tax advantages.
No outfit has benefited more from that approach than Jack Bogle's Vanguard Group, which has seen its total assets under management swell to nearly $3 trillion thanks to the allure of the firm's funds that track market indexes rather than make individual stock picks, according to a Wall Street Journal report.
That low-risk approach has gotten the imprimatur of none other than legendary investor Warren Buffett, who gave the firm his imprimatur a few months back. In his annual letter to shareholders, he advised them to follow the directions in his will, which mandates that his $66 billion fortune be divided with 10 percent in short-term government debt and the rest "in a very low-cost S&P 500 index fund. (I suggest Vanguard's.)."
Most Americans don't realize the stock market gained 30 percent last year, and only 1 in 9 call themselves savvy about investing, according to a recent survey.
Gallup found that 37 percent of those polled believe the market increased 10 percent in 2013, a year in which the S&P 500's total return was 32 percent. Just 7 percent recognized the 30 percent gain, and 9 percent thought stocks actually decreased.
Those results mesh with a general distrust of the market. Given the choice of what to do with an extra $10,000 in cash, 41 percent said they would put it in the market, but 36 percent opted for cash and 20 percent chose a near-zero yielding certificate of deposit.
The largest public pension in the country has quietly reduced its investment in one of the largest technology investment firms.
The California Public Employees' Retirement System sold about 30 percent of its stake in private equity firm Silver Lake last year, according to Fortune. CalPERS had invested about $275 million in 2008 for a 9.9 percent stake, according to press reports at the time. The investment was in the firm's management company, separate from its positions in Silver Lake's PE funds.
CNBC's Patti Domm and Jeff Cox discuss the jobs report and the current dilemma of long-term unemployment.
CNBC's Patti Domm and Jeff Cox discuss the recent GDP numbers and what factors have been affecting it.
Investors give and investors take away, and nowhere has that been more true lately than in value stocks.
Wharton's Jeremy Siegel just introduced a caveat to his perennially bullish outlook for the markets.
September is typically not good for the market, says NYSE floor trader Kenny Polcari. Is there pain ahead?
Bove sees a scenario in which long-term financing that has come with fixed interest rates is endangered as mortgage buyers dry up.