At Hedge Fund Gala, Hedge Funds MIA
By Katya Wachtel
The classic Wall Street haunt Cipriani, where Hedge Fund Cares held its annual children charity gala on Thursday night, was noticeably devoid of any people who work for hedge funds.
Instead, the room was filled with those who help keep hedge funds running; there was a ton of guests from the Big Four accounting firms, in particular KPMG, as well as law firms, tax groups, and service providers like Citco and BTIG LLC. There were some hedge fund firms represented of course, including Fortress Investment Group and Tudor Investment Corp.
It seemed odd though, in light of the charity’s name, there were not more traders and portfolio managers in tow.
“They all go to Robin Hood,” said one attendee, referring to the benefit put on by the Robin Hood Foundation, a charity that targets poverty in New York, and whose board includes a rather deep roster of hedge fund heavyweights, including Lee Ainslie, Steve Cohen, David Tepper and Paul Tudor Jones.
Still, the massive Cipriani space on 42nd Street was packed until 10pm, long after Hedge Funds Care honored former Yankees manager Joe Torre for his work with Safe at Home, a charity he founded in 2002 aimed at the reduction of domestic violence, with a focus on support for children who are victims of abuse.
“My dad abused my mom,” Torre told Reuters. “I took a lot of emotional scars into my adult life, and I thought, well, this is just the way I was born. This is the way things are.” Torre hopes his foundation will allow children to discover earlier than he did, that a childhood steeped in abuse should not be the norm.
UF’s Weekend Reads
We’re introducing a new feature on UF: a link to some weekend reads. Here is the first edition complied by Sam Forgione.
From The Guardian:
Andrew Balls, head of European investment for PIMCO from its London office, shares similar views on Europe and regulation with his brother, Ed Balls, of the British Labour Party. Brotherly love even extended to one of PIMCO’s major investment decisions: when Bill Gross decided to sell UK government debt in 2010, and Andrew Balls allegedly disagreed with the move, apparently backing his brother’s political status.
From The New Deal 2.0:
An eye for an eye, a rebuttal for a rebuttal. Bruce Judson argues that Jamie Dimon’s vengeful jab at the media for making less money than JP Morgan is unfair. For one, banks are government-backed while media companies aren’t.
From Dealbook:
PIMCO and BlackRock go strolling down K Street
By Jennifer Ablan and Matthew Goldstein
Wall Street may hate financial regulatory reform, but lobbyists certainly love it—especially ones working on behalf of giant asset managers PIMCO and BlackRock, which control a total of nearly $5 trillion in assets.
Last year, PIMCO and BlackRock both upped their lobbying expenditures in a big way.
The not-for-profit group OpenSecrets.org reports that Bill Gross’s Pacific Investment Management Company spent $450,000 on lobbyists last year, up from $120,000 in 2010. BlackRock’s spending on lobbyists rose to $2.5 million in 2011, up from $1.45 million in the prior year.
A BlackRock spokeswoman says the increased spending is a reflection that the firm has “more regulatory issues to deal with.” PIMCO didn’t respond to a request for comment.
The asset managers are ramping up their spending on lobbying at a time federal regulators are considering whether to treat the firms as “systemically important financial institutions,” something that could subject both to more oversight going forward. BlackRock, with more than $3.5 trillion in assets under management, has written several letters to regulators arguing that it doesn’t pose a threat to the financial system since it isn’t making leveraged bets with customer money.
Regulators also are considering rules that could make some of the derivatives trading by PIMCO, with $1.4 trillion in assets under management, more costly. In our Special Report, Twilight of the Bond King, Matt and I talked about the more than a dozen meetings lobbyists and representatives for PIMCO have had with regulators to discuss plans to impose tighter controls on derivatives trading.
Gordon Gekko’s Perfect Hedge
By Matthew Goldstein and Jennifer Ablan
It’s not every day a public service announcement, much less one for the FBI, makes national headlines. Then again, it’s not every day that Michael Douglas reprises his Gordon Gekko role to make a pitch for informants to come forward and help law enforcement smoke out insider traders.
The ad, which has been featured on network newscasts and was heavily touted on the front-page of The Wall Street Journal, highlights the task at hand for the likes of David Chaves, a senior agent with the Federal Bureau of Investigation.
“It’s gone viral,” says Chaves, who is one of the masterminds behind “Perfect Hedge,” the long-running undercover operation that has helped federal prosecutors secure the convictions of more than 50 people on insider trading charges.
The most famous conviction secured by the Perfect Hedge task force is multimillionaire Galleon Group hedge fund founder Raj Rajaratnam and dozens of traders.
Chaves says the FBI coined its investigation Perfect Hedge as it involves an investment strategy position or positions that eliminate all market risk from a portfolio – rarely found – but an occurrence typically with insider’s information.
Phil Angelides gives up his “secret formula”
By Matthew Goldstein and Jennifer Ablan
Phil Angelides, the former chairman of the commission set up by Congress to look into the causes of the financial crisis, is no longer part of a group seeking to turn a profit by investing in distressed mortgages.
A representative for Angelides emailed a statement to Reuters saying the former California state treasurer stepped down as executive chairman of the upstart firm, Mortgage Resolution Partners, on Jan. 27. Angelides, as we reported today, stepped down about two weeks after our exclusive story about his role with the firm was published by Reuters.
Angelides’ role sparked controversy because the firm touted its political connections as part of its “secret formula” for negotiating deals to buy distressed mortgages.
We only found out that Angelides left Mortgage Resolution Partners when we asked him to comment on a recent letter from a U.S. Congressman criticizing the firm’s marketing strategy.
On Feb. 10, Rep. Patrick McHenry, chairman of a House Oversight and Government Reform subcommittee on TARP program, sent a letter to Shaun Donovan, the Obama administration’s secretary of Housing and Urban Development, asking him for details about steps that are being taken to guard against “cronyism or conflicts” in the recently announced $26 billion mortgage settlement with the nation’s big banks.
McHenry, a Republican from North Carolina, took note of our Reuters story and the firm’s claim that it would use “legal and political leverage” to acquire the loans of distressed homeowners.
Paul after PIMCO
By Jennifer Ablan and Matthew Goldstein
Paul McCulley says working at bond giant PIMCO was like being in Camelot. But in some ways, Bill Gross’s former top Federal Reserve watcher seems a lot happier and more at peace with himself since leaving the Newport Beach, Calif.-based firm at the end of 2010.
These days McCulley, who is credited with coining the phrase “shadow banking” to describe the role Wall Street banks and hedge funds play in pumping liquidity into the financial system, looks more like a professor at some liberal arts college than a once mighty money manager of some $50 billion.
His hair is long—down to his shoulders. He sports a beard and has lost 20 pounds. He regularly walks 8 miles a day and spends as much time fishing as he does thinking about ways to get the U.S. economy out of its current liquidity trap—a situation in which all the Fed’s priming of the pump does little until consumers can get relief from all the mortgage and credit card debt they accumulated in the past decade.
McCulley decided to leave PIMCO shortly after he got nixed from consideration by President Obama for a Federal Reserve governorship. McCulley doesn’ t like to talk about the consideration process but he admits that he always dreamed of being on the Fed.
Hedge funds try to hook up with pension funds
by Svea Herbst-Bayliss and Katya Wachtel
In investing, as in life, it is critical to find the right partner.
On Tuesday in Boca Raton, big hedge funds including Tudor Investment Corp., Marathon Asset Management and York Capital, as well as smaller rivals like Voltan Capital Management and Titan Capital Group crowded into a large conference room for the hedge fund industry’s version of speed dating.
Seated at tiny round tables, the managers (who are in Florida for the GAIM USA investor conference) eagerly awaited visits from potential investors like state pension funds from Wisconsin and North Carolina, and fund of funds firms like Rock Creek Group.
Every few minutes a bell tolled telling the roughly 50 investors there to move on to the next date. The ratio was about two managers for every investor. Time was of the essence as managers rattled off their skills.
The conferences organizers had advice for participants: “Drink plenty of water, and have something to write with.”
GAIM USA, the first major event on the hedge fund conference calendar, follows one of the industry’s worst annual performances in its history. Despite losses of about 5 percent for the average hedge fund last year, pension funds and other big investors are still looking to put money in.
Hedge fund faithful descend on Boca Raton
By Svea Herbst-Bayliss and Katya Wachtel
Balmy temperatures and sunny skies greeted hedge fund industry managers, investors and lawyers as they gathered in Boca Raton, Florida, for 2012′s first prominent industry conference.
Despite clear skies overhead, the mood was decidedly grimmer at the GAIM 2012 USA meeting, held at the swanky Boca Raton Resort and Club, as the industry faces dramatic regulatory changes after having ended 2011 on a losing note.
As managers drifted between sessions that promised “unique insights” from top traders about where to make money to how regulation will affect the industry, many quietly shared tales of woe about last year’s losses, when the average fund lost 5 percent. Top investors conceded that times would be tough in the months ahead but that hedge funds are still the way to go for pension funds and others that need to boost investment returns with strong performance.
Prominent managers like Marathon Asset Management’s Bruce Richards and Oak Hill Advisors President Glenn August mingled with investment chiefs for the states of Florida and Wisconsin.
For the first time ever the organizers of this conference had invited media to attend, but then reversed the decision at the last minute saying many of the sessions were closed to the press, which is not uncommon in the historically secretive industry.
Some 500 people came to Boca Raton in search of ideas and more critically money — many investors said they were inundated with requests for meetings from tiny newcomers.
For one Level Global founder, the party is over
By Katya Wachtel
For the two founders of FBI-raided and since-shuttered hedge fund firm Level Global, life could not be more different.
In early January, one co-founder, David Ganek, sat court-side at Madison Square Garden as the Charlotte Bobcats pummeled the New York Knicks. Ganek appeared relaxed and jovial as he greeted familiar faces in the front row. The Knicks lost, but Ganek could still enjoy the Knicks home-base party.
For Level Global’s other founder, Anthony Chiasson, life is not as sweet.
On Wednesday Chiasson (who launched Level Global with Ganek in 2003) was charged with insider trading as part of the FBI’s sweeping “Operation Perfect Hedge” investigation. Ganek has not been accused of any wrongdoing.
Chiasson and six others (including another former Level Global-ist, analyst Spyridon Adondakis) are accused of running a $62 million insider trading scheme in 2008 and 2009. He was released on $5 million bail on Wednesday, and has denied the charges against him.
Of all the defendants who are accused of lining their pockets with ill-gotten gains, the figure attached to Chiasson and Level Global is the largest: $57 million.
When (and where) the 1% talk about 99%
By Jennifer Ablan and Matthew Goldstein
The last place you’d think a group of Wall Street financiers and ex-politicians would convene to come up with a master plan for fixing the housing crisis is a luxury lodge overlooking the Golden Gate Bridge. But in November, during the height of the Occupy Wall Street protests, that’s where 30 rich and powerful people assembled to “do a good thing” for America.
The meeting at Cavallo Point in Sausalito, Calif., aimed to “hammer out a business plan and chart a course through 2012″ for an investment vehicle that intends to buy up troubled mortgages and help out the homeowners all the while making a 20 percent annual return. You can read the details here
The group is led by Phil Angelides, the California politician, land developer and most recently, the chairman of a federal commission who led investigations into why the financial markets collapsed. The Federal Crisis Inquiry Commission was criticized for failing to come up with any real proposals preventing another crisis. Yet it seems to have inspired Angelides (his tenure at the FCIC ended last February) and others to come up with a market-based solution to the housing debacle.
Now that may be part of the answer. But once again, it seems to be a case of the well-off and powerful talking to themselves. In a letter to potential investors of Angelides’s Gordian Sword LLC, there’s lots of talk about doing good for America and its disastrous housing market. What’s missing at times, however, is the focus on the people hurting the most: Millions of Americans are struggling to keep up on their mortgage payments.
Consider this self-congratulatory remark in the letter
This narrative ends with a restored community: home prices level off, labor is free to move, consumer confidence returns, and perhaps the recovery can commence. Everyone involved — local government agencies and politicians, Servicers and even Wall Street — can take credit for neighborhood recovery.
