Will a collection of hedge funds, carefully selected by experts, return more to investors over the next 10 years than the S&P 500?
Prediction: Over a 10-year period commencing Jan. 1, 2008, and ending Dec. 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs, and expenses.
A recent report that Galleon investigators have subpoenaed a former SAC Capital Advisors employee shows that the scandal's tentacles are maybe reaching farther and farther.
While there has been some excitement in the courtroom itself during the first few weeks of the federal criminal trial of Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin, the real action in the trial so far seems to be taking place in and around a small bank in Florida that had nothing to do with the original conspiracy and the fraud charges filed against the two men in June 2008.
When last week the federal government arrested Raj Rajaratnam of the Galleon Group for masterminding a $25 million insider-trading ring, the biggest head-scratcher was the inclusion of Anil Kumar in the government's complaint.
The $20 million insider-trading ring that the U.S. government alleges was masterminded by billionaire hedge-fund manager Raj Rajaratnam also included two former Bear Stearns hedge-fund managers. According to two federal complaints, two of Rajaratnam's partners in the alleged crimes were Mark Kurland, of Mount Kisco, N.Y., and Danielle Chiesi of New York City. Both Kurland, 60, and Chiesi, 43, were arrested last week, along with Rajaratnam, and charged with insider trading. Bail for Kurland was set at $3 million and for Chiesi at $2 million (Rajaratnam's was set at $100 million).
Galleon may have been holed below the waterline. The indictment of Raj Rajaratnam, the technology-focused hedge fund firm's founder, on insider trading charges is likely to scare investors away. Amid the shock and the intriguing details of the allegations, there's a broader lesson for investors about hedge fund governance.
Hedge funds are finally getting their heads above water. The average fund could soon regain the high water mark at which its manager starts minting performance fees again.
Two former Bear Stearns hedge fund managers go to court Tuesday in the first, and so far only, prominent criminal trial stemming from the mortgage meltdown.
In a bit of pre-trial drama, federal prosecutors recently placed the digital diary of Matthew Tannin into the public record. In it, the Bear Stearns hedge fund manager fretted about becoming addicted to sleeping pills some six months before the funds he co-managed blew up in the summer of 2007.
Will a collection of hedge funds, carefully selected by experts, return more to investors over the next 10 years than the S&P 500?
Prediction: Over a 10-year period commencing Jan. 1, 2008, and ending Dec. 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs, and expenses.
A recent report that Galleon investigators have subpoenaed a former SAC Capital Advisors employee shows that the scandal's tentacles are maybe reaching farther and farther.
While there has been some excitement in the courtroom itself during the first few weeks of the federal criminal trial of Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin, the real action in the trial so far seems to be taking place in and around a small bank in Florida that had nothing to do with the original conspiracy and the fraud charges filed against the two men in June 2008.
When last week the federal government arrested Raj Rajaratnam of the Galleon Group for masterminding a $25 million insider-trading ring, the biggest head-scratcher was the inclusion of Anil Kumar in the government's complaint.
The $20 million insider-trading ring that the U.S. government alleges was masterminded by billionaire hedge-fund manager Raj Rajaratnam also included two former Bear Stearns hedge-fund managers. According to two federal complaints, two of Rajaratnam's partners in the alleged crimes were Mark Kurland, of Mount Kisco, N.Y., and Danielle Chiesi of New York City. Both Kurland, 60, and Chiesi, 43, were arrested last week, along with Rajaratnam, and charged with insider trading. Bail for Kurland was set at $3 million and for Chiesi at $2 million (Rajaratnam's was set at $100 million).
Galleon may have been holed below the waterline. The indictment of Raj Rajaratnam, the technology-focused hedge fund firm's founder, on insider trading charges is likely to scare investors away. Amid the shock and the intriguing details of the allegations, there's a broader lesson for investors about hedge fund governance.
Hedge funds are finally getting their heads above water. The average fund could soon regain the high water mark at which its manager starts minting performance fees again.
Two former Bear Stearns hedge fund managers go to court Tuesday in the first, and so far only, prominent criminal trial stemming from the mortgage meltdown.
In a bit of pre-trial drama, federal prosecutors recently placed the digital diary of Matthew Tannin into the public record. In it, the Bear Stearns hedge fund manager fretted about becoming addicted to sleeping pills some six months before the funds he co-managed blew up in the summer of 2007.
A gleaming Manhattan skyscraper and a group of well-heeled stockbrokers were some of the coveted assets that JPMorgan Chase snatched up when it acquired Bear Stearns for $10-a-share in March 2008. But like the stick of dynamite that lies hidden in one of Wiley Coyote's birthday cakes, JPMorgan also took on the liability for all of Bear Stearns ongoing litigation as part of that merger. So when the criminal trial of Ralph Cioffi and Matthew Tannin, the managers of the two failed Bear Stearns hedge funds that sparked a market meltdown in 2007, begins next Tuesday, JPMorgan's interest in the case will be more than academic.
Despite all the finger-pointing over who's to blame for the worst financial crisis since the Great Depression, just two prominent players face criminal charges.
The much awaited trial of Ralph Cioffi and Matthew Tannin, the managers of two failed Bear Stearns hedge funds that sparked a market meltdown during the summer of 2007, looks like it will have a new twist when it gets underway on October 13. One of the defendants, Ralph Cioffi, made a lightening-fast trip to Florida last month allegedly to get his hands on a key piece of evidence -- documents from Busey Bank, in Ft. Myers, Fla. Was the hedge fund manager engaging in a cover-up, as the U.S. Attorney's Office in Brooklyn asserts? Or was Cioffi merely up to a bit of amateur detective work to exonerate himself, as his defense attorney claims?
The hedge fund manager who made his name by predicting the demise of Enron says he warned world leaders of a systemic banking failure in 2007, but he was ignored.
Investors have been putting money back into hedge funds over the last three months as the worst of the credit crisis appears to have passed, but analysts say a return to the industry's heyday is not likely.
For retail investors who want to put money into the hedge-fund-like vehicles, the options continue to grow.
In the latest edition of his seminal textbook, "Pioneering Portfolio Management," David F. Swensen, the chief investment officer of the $22.5 billion Yale Endowment, wrote that "strangely absent" from hedge fund Fortress Investment Group's SEC registration filing in 2006 was a section on "Greed." Since Swensen's book was published in January of this year, Fortress has once again demonstrated the risks of investing with the fast-money crowd: this time through a little-noticed $200 million, secondary stock offering on May 14 that is already trading 20% below its $5 per share offering price.
An industry lately synonymous with losses, liquidations, and fraud is showing signs of recovery. An uptick in new hedge funds suggests that investors are warming to them again. And trends among the newly launched funds show how that high-rolling world has changed in the aftermath of the credit collapse.
They pray for recessions and smile a little wider when a company climbs onto its death bed.
After dozens of blow-ups and the stink of the Madoff mess, a sane investor might think any investment with "hedge fund" in its name might as well be called "run screaming in the other direction."
Despite turbulence in the financial markets and the global economic downturn, the world's 25 top-earning hedge fund managers raked in a staggering $11.6 billion last year, according to a ranking released Wednesday.
The Obama Administration's latest bailout plan is as rich with irony as it is with potential.
The managing partner of a New York law firm pleaded not guilty Thursday to charges in an alleged $700 million fraud against various hedge funds, the U.S. attorney's office here said.
Is the current downturn merely a severe slump, or are we facing a second coming of the Great Depression? That's the question everyone is asking these days. But Ray Dalio, founder of Bridgewater Associates and manager of what is now the world's biggest hedge fund, has been preparing to answer it for eight years.
The federal criminal trial of former Bear Stearns hedge-fund managers Ralph Cioffi and Matthew Tannin, which is set to begin in Brooklyn in September, has been expected to be a kind of template for coming Wall Street prosecutions. But the model case is already getting messy.
Years from now, when academics search for causes of the stock market crash of 2008, they will focus on the pivotal role of mortgage-backed securities. These exotic financial instruments allowed a downturn in U.S. home prices to morph into a contagion that brought down Bear Stearns a year ago this month - and more recently have brought the global banking system to its knees.
The hedge-fund debacle and the fateful decision to lend $1.5 billion to the High-Grade Fund led to Bear Stearns' first quarterly loss in its 85-year history, in the three months ended November 2007. Besides Cioffi and Tannin, there was other collateral damage. On August 1, 2007 Jimmy Cayne fired Warren Spector. On January 2008, Cayne resigned as CEO probably within days of a coup d'etat that was percolating throughout the firm's corridors. (Cayne remained the Chairman of the firm's board of directors).
Hoping to help plug the gaping hole in the nation's deficit, the Obama administration is looking for a little help from an unlikely source: the financial services industry.
In what looks like a sign of the hard times in the hedge fund world, AQR Capital Management - one of the industry's biggest names - is opening its doors to the retail market.
Cioffi lived very well. In 2000, he and his wife, Phyllis, purchased a home for $815,000 in Tenafly, New Jersey, that in 2007 was assessed for $2.6 million. He owned a home in Naples, Florida, valued at $933,000, and a home in Ludlow, Vermont, valued at $2.2 million. He owned an apartment at the Stanhope, on Fifth Avenue in Manhattan, and a $10.7 million, 6,500-square-foot home in Southampton, Long Island, which had six bedrooms, seven baths, a pool, a tennis court, and a separate guesthouse on two and a half acres.
One of the more repeated comments heard in the after hours chatter in the salons of Davos was that no one from the financial industry has actually apologized for the mess they've created in the global financial system.
When the headhunter first called Richard Baker in late 2007 and asked him if he was interested in becoming president and CEO of the Managed Funds Association - the hedge fund trade group - Baker thought it was a joke. "My reaction was, 'You want me to do what?'"
Yes, there really are times when life imitates art. A case in point: the Bernie Madoff scandal, in which the disgraced investor bears a startling resemblance to Zero Mostel's sleazy theater promoter in one of my favorite flicks, "The Producers."
A record number of hedge funds went bust during the third quarter, a report showed Thursday, as shaky markets and tight credit drove investors away from risky investments.
Not quite rich enough and not quite smart enough, a certain investing class has for years paid through the nose for what was thought to be world-class money management by investing in funds that promise access to the best hedge funds.
Now that the Madoff fraud has been exposed there are still a slew of fundamental questions outstanding.
On the morning of Friday, Oct. 24, James Forese, Citigroup's head of capital markets, picked up the phone and called Kenneth C. Griffin, the founder and chief executive officer of Citadel Investment Group, a Chicago-based hedge fund that manages $15 billion and has 1,300 employees worldwide.
The managing partner of a New York law firm has been arrested on charges stemming from an alleged $100 million fraud against various hedge funds, the U.S. attorney's office in New York said Monday.
With oil now at $50 a barrel, you no longer hear Congress complaining about oil speculators. The irony is there's probably more real speculation going on today than there ever was back in June and July.
A Congressional panel grilled five of the world's richest and most powerful hedge fund managers Thursday as lawmakers sought to understand how much blame they could assign the little-understood hedge fund industry for the global economic collapse.
A congressional committee scrutinized risks in the hedge fund industry on Thursday to determine whether further regulation is needed.
Years before Dwight Walter Anderson was running the world's largest commodities hedge fund from an office 27 floors above New York City's Park Avenue, he was on the road for a software consulting firm based in Chicago.
Bear in mind two caveats as you peruse these comments. First, I run a hedge fund, so I am hardly an unbiased observer. Second, nobody, and I mean nobody, really knows what hedge fund liquidity is or what redemptions are or will be.
As the lights fade across the hedge fund universe, SAC Capital Advisors had been one of the few funds unbowed by the rout that has forced countless rivals to close or suspend redemptions.
In a time when closures or panicked liquidations of name-brand hedge funds have become commonplace, the opening of a $1 billion fund trading mortgage-backed securities and other types of credit should attract more than a few raised eyebrows.
Here's a sign that the credit markets are thawing: Some blue-chip merger targets are looking like less like blue-light specials.
Shorting VW proved disastrous when high-rollers discovered that the company had been stealthily acquired by their favorite sports car's maker
Stocks plunged again Friday. Ugh! It's getting more difficult by the day to maintain that the worst may be over.
Nervous investors fled hedge funds as the market meltdown got underway, setting records for investor redemptions and asset declines in the third quarter, according to a report from an industry research firm issued Friday.
The market downturn hasn't just been hard on ordinary investors; it has also hurt the high flyers
A chapter in one of Wall Street's more bitter and colorful legal sagas ended Monday when Internet retailer Overstock.com and independent research outfit Gradient Analytics settled their differences.
The swaggering, ultra-rich hedge fund manager, manager, an unloved species to begin with, is very possibly becoming endangered.
David Einhorn should be celebrating one of the best months of his career. Two companies whose stock he bet big against - Lehman Brothers and Allied Capital - suffered grave blows, with Lehman filing for bankruptcy and Allied shares plunging 60%.
The domino nature of the looming hedge fund crisis is neatly illustrated by the troubles of a high-flying New York fund with a niche that was supposed to be recession proof.
As Congress wrestles with another bailout bill to try to contain the financial contagion, there's a potential killer bug out there whose next movement can't be predicted: the Credit Default Swap.
As the summer of 2008 drew to a close, many hedge fund managers were worried about coaxing their returns out of negative territory by the end of the year. Thomas Steyer, who founded the giant Farallon Capital Management, was worried about his hedge fund, but he was also losing sleep over getting Barack Obama elected president. For the first time in its 22-year history, Farallon was on track for a calendar-year loss. At the end of June the firm's flagship fund was off a little more than 5%, according to an investor report obtained by Fortune, and Farallon hasn't made up the lost ground since.
If the death of Lehman Brothers upset the financial world, a collapse at AIG would have turned the credit markets upside down.
In the early morning hours last Sept. 11, a black Town Car pulled up to the entrance of New York-Presbyterian Hospital in Manhattan. Inside the sedan Jimmy Cayne, the CEO of Bear Stearns, was close to death. At dawn Cayne's wife had placed an emergency call to his physician, Dr. Jay Meltzer, and when Meltzer arrived at the couple's Park Avenue apartment, Cayne, then 73, was drowsy and desperately weak and had no appetite. His blood pressure was dangerously low. He was breathing very rapidly and deeply. Meltzer suspected sepsis. Rather than call an ambulance, Cayne asked for a car, in part because he feared that a public disclosure about his health could further damage the firm - a firm whose stock price had already dropped close to 27% (from $143 to $105 a share) since two of its highly leveraged hedge funds had imploded in June.
Third Point Management, a New York hedge fund run by one of the country's most outspoken and controversial investors, has come under investigation from the Securities and Exchange Commission.
More than 20 separate lawsuits - many since consolidated - have been filed against Bear Stearns, its board of directors and management. Some of the plaintiffs are ex-employees, like Alex Manos, a 27-year Bear veteran who processed trades at the firm's back-office in Brooklyn. They blame the management and the board for squandering their life savings. Others are from shareholders who believe the same group sold the company too cheaply and under duress. And several more focus on the managers of the two Bear Stearns-affiliated hedge funds that dissolved in the summer of 2007 and first revealed to the world the extent of the toxicity of the mortgage-backed securities manufactured and sold by Wall Street.
Watch out, speculators: The Commodity Futures Trading Commission is getting tough on crime. But since, as the CFTC has said, speculation hasn't pushed up prices, the crackdown will benefit its image more than the economy.
Hedge funds delivered their worst performance on record during the first half of 2008, revealing that the industry has not been immune to the broader market turmoil.
Government documents supporting the charges filed last week against two former Bear Stearns hedge fund stars paint a picture of an organization that had a hard time tackling problems head-on - a flaw that ultimately would prove fatal to the firm.
Two former Bear Stearns managers were arrested Thursday on securities fraud and other charges linked to the collapse of a hedge fund that bet heavily on subprime mortgages before the market collapsed
Phil Goldstein became a hedge fund manager thanks to a pair of gray sweatpants. In the summer of 1992 the 47-year-old civil engineer walked into Las Vegas's Mirage hotel to meet his first potential investor. The shorts he was wearing didn't meet the dress code of Moongate, a Chinese restaurant where the two men had planned to meet. He thought the rule was arbitrary, so he went to a nearby gift shop, purchased a pair of sweatpants, changed into them, and returned to the restaurant. After the meal he changed back into his shorts and returned the pants for store credit. When Goldstein also told the prospect that he was staying off the Strip, at a $39-a-night motel, the deal was sealed. "This is a man I want managing my money," the investor told his broker that night.
It's time to say goodbye to Old Lane, the hedge fund management company bought by Citigroup last July.
Wall Street's inner circle contracted significantly after JPMorgan Chase officially completed its historic acquisition of Bear Stearns.
Fortress Investment Group is paying the price for going public. The New York-based firm reported Thursday a sharp decline in earnings as its core hedge fund business felt the effects of Wall Street's market swoon.
Goldman Sachs recently provided a glimpse of one of the rarest occurrences on Wall Street: an analyst recommended that clients bet against a company by selling its shares short. In this case, the company was struggling Seattle thrift Washington Mutual, which happens to be a Goldman client.
A year has made a big difference for Drake Capital Management, which has announced that it is shuttering its flagship hedge fund after a series of bad bets on government bonds.
Back in January, New York Times Chairman Arthur Sulzberger Jr. got a letter from two little-known hedge funds. The funds informed him that they'd bought a large chuck of Times stock. Now they were embarking on a campaign to elect four of their own nominees to the company's board.
Hedge fund manager John Paulson of Paulson & Co. took home $3.7 billion last year, making him the biggest earner in the industry, according to Alpha Magazine.
After months of poor performance, Goldman Sachs has stopped offering an investment account that AQR Capital Management created for the bank's 401(k) lineup.
You could detect a trace of fear in his voice. Mostly he seemed stunned. It was March 6, and one of Bear Stearns's top bond executives had dialed me up unprompted. The executive had dished about competitors in the past, but he had never initiated a discussion, much less one about his own firm. Now he explained that financial institutions that he dealt with - firms he had traded with for years - were suddenly asking him whether Bear had the cash to execute their trades.
It seemed too easy. Two months ago, a pair of little-known hedge funds informed the New York Times that they were mounting a campaign to elect four directors to the company's board. Monday, the nation's most powerful newspaper publisher capitulated and agreed to support two of the insurgent nominees at its annual meeting next month.
In this market, even when a hedge fund is doing well, the wolf can be right outside the front door.
THE SHOW: Are we having fun yet? Me neither. My old pal Deep Blue keeps writing me about various stocks and such that might have upside, but then acknowledges it's hard to imagine much of anything working this year. Except cash, and you better hope that's real cash and not some sort of 'cash equivalent.' Still, there will be winners and losers. I'm sorry I know there will be fits and starts but I really don't see the non-dollar commodity run crashing on us. (See Buffett, Warren on the Brazilian real.) Gold is the new greenback kind of deal....Kudos to hedge fund manager Phil Goldstein who is suing the S.E.C. to lift its ban on advertising. It's just garbage that the hedgies can't do this, and garbage that they can't publically release their returns either. (We all find out, anyway.) All of this is just a holdover from when hedge funds were a tiny, exclusive slice of the financial services pie. Newsflash: they no longer are! Goldstein told the FT: "gun shops are allowed to advertise,
Not long ago, Goldman Sachs alums Geoff Grant and Ron Beller looked like superstars. A prescient wager on the collapse of the subprime mortgage bond market generated last year a whopping 87 percent return for one of their hedge funds.
Everybody's heard of mattresses stuffed with cash, or coins lodged beneath the cushions of a couch. But one venerable Virgina company seems genuinely confused about whether it's in the furniture business or the money business.
Shareholders have a lot to be unhappy with this proxy season. After all, they've lost billions of dollars due to the weakening economy and the mortgage meltdown.
Welcome to superstar hedge fund manager Cliff Asness' winter of discontent.
Harry Macklowe isn't afraid of bad weather. Three years ago a storm came up while the New York developer was sailing with friends near the Corsican coast on Unfurled, his 112-foot yacht. His wife, Linda, and their guests, attorney Samuel Lindenbaum and his spouse, took refuge in their cabins. They were all seasick. Macklowe, however, donned foul-weather gear and happily went up on deck to help sail the yacht with his captain and crew. "It was amazing," Lindenbaum recalls. "Harry was competing with nature - and he won!"
Citigroup is blocking investors from withdrawing their money from a hedge fund specializing in government debt after a near run on its assets, according to a published report.
Back in 2006, Fairfax Financial Holdings, Canada's largest publicly traded insurance firm, filed suit against a group of short-sellers, investors who'd bet that the company's share price would decline. The suit alleged that the sellers had illegally conspired with analysts to drive down Fairfax's stock price.
One early Wednesday morning last July, when the subprime mortgage meltdown first began to rock the markets, I found myself sitting with investing legend Julian Robertson in the cabin of his Gulfstream V jet in Auckland, New Zealand. We were en route to one of the two world-class golf courses he has built in the island nation. But his mind was on the markets halfway around the world. As the flight crew prepared for takeoff and his wife Josie and their other guests found their seats, the 75-year-old billionaire used his mobile phone to check in with his office back in New York. "How are the subprime positions looking?" he asked excitedly. "Mm-hmm. Wonderful."
Bank stocks have taken a huge hit. Do you expect them to continue to underperform, or is this a buying opportunity? - STEVEN HARVEY, TOWACO, NJ
Goldman Sachs is aiming to raise $6 billion for what would be one of the biggest hedge fund launches ever, according to a report published Friday.
Investors who abhor smoking or environmental degradation are regularly told by financial advisors that they should choose stocks that yield the highest returns, including stocks of companies that produce tobacco or pollute the environment, and then donate their profits to campaigns for the causes they support.
Some of Britain's biggest hedge fund managers have introduced measures aimed at improving transparency of the industry, the latest move to ward off greater oversight of the booming business.
Boutique investment bank Perella Weinberg Partners has bought Xerion Capital Partners, a hedge-fund firm that specializes in the debt of distressed companies.
The $1.7 trillion hedge fund industry has seen a hotbed of merger activity in recent years, as Wall Street firms have pushed into the booming business.
The Securities and Exchange Commission is ratcheting up scrutiny of the potential for insider trading at hedge funds.
Citadel Investment Group, the closely-watched hedge fund company that aims to evolve into a financial firm that can take on Wall Street's biggest brokerages, has poached a senior executive from Goldman Sachs in a move that strongly suggests Citadel will soon announce plans to go public. John Andrews, Goldman's head of investor relations, has agreed to join Citadel, says Katie Spring, a spokeswoman for Citadel.
A hedge fund run by Wall Street powerhouse Goldman Sachs posted the worst monthly performance in its 12-year history in August, according to a published report.
Hedge fund investors have grown used to huge returns. No longer.
Hedge funds performance suffered last month as the subprime crisis and credit crunch increased volatility in financial markets.
Those who oppose hiking taxes on private equity partnerships and hedge fund managers have been trying to make the case that any increase would end up hurting policemen, firemen, teachers and anyone else with a pension, since pensions are major investors in alternative investment funds.
Hedge funds, which have an estimated $1.9 trillion in assets combined, saw investors sell off an estimated $32 billion worth in July, said a report Tuesday.
An Australian hedge fund felled by its exposure to risky credit derivatives has filed for bankruptcy protection in the United States, and liquidators on Thursday were assessing how much money, if any, would be returned to investors.
Bear Stearns Cos. Inc.'s rivals are aggressively courting the investment bank's prime brokerage customers, telling them it's too risky to stay while the firm deals with fallout from the subprime mortgage crisis.
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