A few billionaire investors have scored, but the average hedge fund worker isn't likely to see a fat bonus this year.» Read More
Financial analyst Meredith Whitney's hedge fund firm, Kenbelle Capital, seems to be in trouble a little more than a year after it launched.
Two executives have left the fund, and its biggest investor, a group tied to BlueCrest Capital Management, has requested to redeem its investment—not once, but twice—sources told Bloomberg.
A LinkedIn profile indicates that Kenbelle co-founder and portfolio manager Stephen Schwartz left in November. Kenbelle CFO Andrew Turchin has parted ways as well, a person familiar with the matter told Bloomberg.
Kenbelle invests in U.S. equities and targets annual returns of 12 percent to 17 percent. But Kenbelle's American Revival Fund lost 4.7 percent through the first half of the year, according to a July investor letter, Bloomberg said. The American Revival Fund invests in stocks following national trends.
Whitney rose to prominence for her prediction on Citigroup's mortgage troubles leading up to the financial crisis while she was an analyst with Oppenheimer.
Hedge fund shut downs have escalated in 2014 after another year of relatively weak returns. Through September, 661 hedge funds have closed this year. But hedge fund industry assets have still increased overall this year—gaining about $190 billion in capital through October.
Howard Marks thinks that the drop in oil prices could finally expose low lending standards and ultimately provide better value in the markets.
"We've argued for a few years that credit standards were dropping as investors—chasing yield—became less disciplined and less discerning. But we knew buying opportunities wouldn't arrive until a negative 'igniter' caused the tide to go out, exposing the debt's weaknesses," the Oaktree Capital Management chairman wrote in a note to clients late Thursday.
"The current oil crisis is an example of something with the potential to grow into that role. We'll see how far it goes."
The surging power of activist investors is bolstered by a growing ally: public pensions and other big institutions.
"Activists have become more effective because they can draw upon institutional investor support and can help companies drive their stock prices closer to intrinsic value," said Greg Taxin, managing member of activist investor Luma Asset Management. "It's a great thing for investors, for pensioners, for retirees and the capital markets generally."
Taxin, the recently departed president of hedge fund firm Clinton Group, made the comments this week during a panel discussion on activist investing hosted by the Harvard Business School Club of New York and moderated by Yale School of Management's Jeff Sonnenfeld.
2015 is shaping up as the year the U.S. consumer will have to shine the light for the rest of the world—or else.
Main Street Americans have been the neglected stepchild of the bifurcated post-crisis economy, in which stock market players at the top of the scale have seen their assets blossom while real incomes have stagnated and prices at the grocery store and gas pump climbed.
That dynamic at least has the potential to change.
Most strategists are predicting trend-like returns for the S&P 500 as they see less accommodative monetary policy creating a more challenging environment for equity gains.
Meanwhile, a strengthening dollar and declining energy prices are creating a more favorable landscape for consumers.
Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, believes the trend could be the most important thing for investors to watch in the year ahead:
Early effects of market turmoil in Russia are starting to show up in the U.S., but it's not outright panic.
Investors pulled just $55.9 million over Monday and Tuesday from the largest Russia-focused exchange-traded fund, Van Eck's Market Vectors Russia, according to data from ETF.com. The Russian stock-focused fund still manages $1.23 billion and has seen net inflows of $1.22 billion over 2014 despite losing more than 50 percent of its value (The net flow number reflects big swings over 2014; the fund started the year at $1.05 billion, with a high point of $2.1 billion and a low point of $719 million).
The much-smaller iShares MSCI Russia Capped ETF had virtually no net outflows this week and only lost $4.2 million so far in December, according to ETF.com. It manages $151 million overall.
"Investors are not pulling out of Russia en masse yet because of what's going on this week," said ETF.com analyst Stacey Brorup. "There have been outflows all month long before the ruble drop and overall the fund is still up in assets for the year."
Sage Kelly, the Jefferies banker at the center of a salacious marital scandal, has resigned.
The former head of healthcare investment banking — already on voluntary leave because of a nasty divorce proceeding that attracted significant media attention for its allegations of drug use and extramarital sex — is leaving to "focus on family matters," according to a person close to the situation.
A spokesman for Jefferies declined to comment. The news was announced in an internal Jefferies memo Wednesday morning.
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.
Less cash flow from oil firms may pinch loan payments to banks but gas savings for consumers will create new business.
Some big news this week, including Russia and North Korea. Did any change the game for the market? NYSE floor trader Kenny Polcari weighs in.
Oaktree Capital's Marks thinks that the drop in oil prices could finally expose low lending standards.