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Brief HF Brief 2012212 1
Brief HF Brief 2012212 1
BRIEF
By KELLy BiT
Bloomberg
Hedge Funds
02.21.12
www.bloombergbriefs.com
performance snapshot: best of 2011 The five best-performing funds in long/short equity, global macro, fixed-income arbitrage, distressed and CTA/managed futures strategies. page 10 bridgewater sells $250 million stake Texas Teacher Retirement System approved the acquisition of $250 million-worth of equity in Ray Dalios firm. page 3 paulson predicts greek default John Paulson expects a Greek default to lead to the disintegration of the euro zone. page 6 from the minutes Highlights from minutes of public pension and endowment meetings. page 4 13f forensics: google inc. Hedge funds added almost $3.9 billion-worth of Google shares. page 7 market calls, revisited How Daniel Arbesss stock picks have turned out a year later. page 6 commodities Hedge funds boost bullish bets to the highest level in almost five months. page 5 over the hedge Paul Tudor Joness Everglades Foundation, Bruce Kovners donation to Mitt Romney. page 9 calendar pages 12-13 spotlight SLJ Macro Partners Founder Stephen Jen on why the current equities rally wont last. page 14
new mAndATes
InsTITuTIon employes retirement system of texas Finandir AllocATIon $358 million in up to eight funds in 2012 $500,000 per fund to start seArch sPecIFIcs erP introduced its hedge fund/absolute return program dec. 2, through which it will invest a total of up to $3 billion by 2015. French multi-family office seeks long/short equities funds (global or region-specific) and one global macro manager. long/short strategy may not be levered more than 30 percent. amsterdam-based wealth adviser searches for currency and global macro funds. mAnAGer requIremenTs tBd. see from the minutes for more information. Five-year track record. at least $100 million in the fund. $40 million aUm, two-year track record preferred.
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saye capital management lp, the $65 million Manhattan Beach, California-based mortgage- and asset-based securities hedge fund run by Jeff saye, climbed 21 percent last year in its Spectrum Fund by finding undervalued senior non-agency prime, Alt-A and subprime mortgages. it was identifying collateral pools that offer value misperceived or not perceived by the market place, Saye said. This type of relative-value strategy should continue to be profitable this year; even as the non-agency mortgage market faces the challenges of delinquencies and foreclosures, many bonds can be oversold, which creates opportunities to find value, Saye said. t.a. mckay & co., the $200 million New york-based distressed debt hedge fund run by thomas mckay, gained 13 percent in its Simplon Fund last year because of a position in navigator holdings plc and by focusing on short-dated senior and secured debt and holding higher amounts of cash that usual, according to andrew lipman, head of marketing. Navigator Holdings, the Castletown, isle of Man-based energy transportation company that is the funds largest position, surged 74 percent last year. investors bet on its intermediate- and long-term growth potential, Lipman said. The fund also kept about 20 percent of its portfolio in Said Haidar cash, higher than the usual range of anywhere from zero to 10 or 15 percent at a given time, Lipman said in a telephone interview. it began deploying some of the cash in November to senior bonds or bank debt, he said. Overall, one position did very well, most of the others did okay, and we managed to avoid any material losses, Lipman said. We had an outlook going into the year that credit yields were low and you werent getting paid a lot to take risk. That told us we should keep more cash. The biggest part of the bell curve of our portfolio is bonds or bank debt that are senior, not highly levered and where theres not much interest-rate risk. Fixed-income managers should continue to outperform equity managers for years, according to shalabh garg, chief investment officer at nomura global alpha llc, whose NGA Capital Feeder Fund, a fixed-income arbitrage strategy, climbed 16 percent last year. Bouts of volatility are making it hard for hedge funds to capture the move, Garg said of equity managers. The Sharpe ratio of fixed-income returns have been improving, partly as a result of accommodative monetary policy worldwide but also as search for stable yield. Most fixed-income managers have been beneficiaries of that trend. We think this is likely to continue for several years to come. Lipman said his firm has a similar outlook on 2012 as it had last year and does not expect its strategy to change materially for the time being. Haidar is currently moderately positioned for a risk-on period until the summer and likes U.S. inflation-linked bonds, which look inexpensive, he said. The Fed with an inflation target of essentially 2.3 percent on CPi makes inflationlinked bonds look a little cheap in the U.S., Haidar said. He expects bonds will perform well until the governments next round of quantitative easing, which may occur in April, he said. Haidar founded his namesake firm in 1997. Before that, he was director and head of research in fixed income proprietary trading at Credit Suisse First Boston. in 2007, Haidar and two firms he controls agreed to pay $4.6 million to settle U.S. Securities and Exchange Commission claims they made mutual-fund trades that can hurt other investors. They neither admitted nor denied wrongdoing. The case stems from a U.S. regulatory crackdown, starting in 2003, on trading abuses in the mutual-fund industry. Market timing, while not illegal per se, exploits inefficiencies in pricing and can increase transaction costs borne by long-term investors.
It seems likely that the pressure to keep the euro together becomes too great and it ultimately falls apart.
John Paulson in a 100-page letter to investors. See story, page 6.
bloomberg brief hedge funds newsletter Ted Merz executive editor [email protected] 212-617-2309 bloomberg news Larry Edelman managing editor [email protected] 617-210-4621 hedge funds Nathaniel E. Baker editors [email protected] 212-617-2741 Melissa Karsh [email protected] 212-617-4557 reporter Kelly Bit [email protected] 212-617-1097 contributing Katherine Burton reporters [email protected] 212-617-2335 Saijel Kishan [email protected] 212-617-6662 contributing Matthew Kelly data editors [email protected] 609-279-5064 Anibal Arrascue [email protected] 609-279-5084 newsletter Nick Ferris business manager [email protected] 212-617-6975 advertising [email protected] 212-617-6975 reprints & Lori Husted permissions [email protected] 717-505-9701 To subscribe via the Bloomberg Terminal type BRIEF <GO> or on the web at www.bloombergbriefs.com. 2012 Bloomberg LP. All rights reserved. This newsletter and its contents may not be forwarded or redistributed without the prior consent of Bloomberg. Please contact our reprints and permissions group listed above for more information.
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Fund Focus
ray dalios Bridgewater Associates sells $250 million stake to Texas Teachers
By DAviD MiLDENBERG AND SAiJEL KiSHAN
bridgewater associates lp, the worlds biggest hedge fund by assets, agreed to sell a $250 million equity stake to texas teacher retirement system as the firm diversifies ownership from its founder. Texas Teacher voted at a meeting on Feb. 16 to approve the transaction, said ted melina raab, senior legislative agent for the Texas American Federation of Teachers in Austin, who was at the meeting. The system is the states largest public pension. Bridgewater, based in Westport, Connecticut, said in a letter to clients that it sold a small stake of non-voting stock in July to an institutional investor and longtime partner as part of a 10-year ownership transition plan. ray dalios firm said it is entering into Ray Dalio similar non-voting arrangements
with two additional investors it didnt identify. Over the past two years Dalio started sharing his role as chief executive officer with greg Jensen, david mccormick and eileen murray before relinquishing that position in July when he became mentor. Dalio, 62, retained his chief investment officer role, which he has shared with bob prince since 1986. in the client letter, the firm said that in recent years Dalio and his family trusts had sold about 20 percent of their Bridgewater shares to more than a dozen key employees, including Prince and Jensen. Our hope is that most of the companys ownership will be transitioned in this way over the next 10 years, with Ray and his family trusts maintaining ownership interests of between 10 and 20
percent, according to the note. The $104.3 billion Texas fund represents 1.3 million teachers and their dependents in the second-most populous state. The fund is the 23rd largest public pension in the world, Harris said during the Feb. 16 meeting. Britt Harris, chief investment officer for Texas Teacher, and Howard Goldman, a spokesman for the pension, didnt return phone calls and e-mails seeking comment on the news that was reported yesterday by Pensions & investments. Harris was CEO of Bridgewater from November 2004 through June 2005 after working as president of verizon investment Management Co. Dalio said Harris had difficulty with Bridgewaters culture, noting theres no doubt that you can talk about the culture, but living it is something different, according to a June 2005 story in Pensions & investments magazine. Dalio called Harris a superstar with an absolutely fabulous character.
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The wIre
mAndATes
de Veste searches for currency, Global macro Funds
de veste asset management, the Amsterdam-based wealth adviser focused on alternatives that has 100 million euros ($131.9 million) in assets, is searching for currency and global macro funds for about $13 million to $65 million in allocations. We think there can be major shifts in the near future between the separate economies, valeer venmook, hedge fund analyst at De veste, said in a telephone interview. That has an effect on currencies more than ever. While the firm is not targeting a specific number of funds, it usually adds four a year, venmook said. it normally deploys between about $660,000 and $1.3 million in initial allocations. De veste prefers that managers have a minimum amount of $40 million to $65 million in assets. it sometimes invests in managers with less, venmook added. De veste also prefers that a fund show at least a two-year track record. The firm favors liquid strategies and managers that invest in their funds, he said.
Kelly Bit
The texas county & district retirement system committed $175 million to Graham Capital Managements Global investment Fund Ltd and $130 million to Asian Century Quest LP on Feb. 1. it was the countys second and third hedge fund allocations this year. On Jan. 1 it committed $200 million to Highfields Capital Management LP. These investments followed about 40 different hedge fund allocations in 2011:
http://bit.ly/z8Tqsh
Noah Buhayar
The new mexico educational retirement board is scheduled to approve an allocation to ice Canyon LLC, the subsidiary of Canyon Capital Advisors, at its investment committee meeting this Thursday. The ice Canyon Strategic income Fund stands to win an opportunistic credit allocation.
http://bit.ly/xe86mM
on The moVe
Alphabet hires scott saiers of uBs for head Trader Position
alphabet management llc, the New york-based hedge fund that uses options to bet on the volatility of stocks and other assets, hired scott saiers as head trader. Saiers, who is the younger brother of Alphabet Chief investment Officer nelson saiers, was previously employed by ubs ag as a managing director, heading the U.S. equity linked trading desk. Prior to that he spent five years on the Zurich-based firms equity proprietary desk and worked as a market maker on its derivatives desk. The 34-year-old trader received his bachelors degree in economics from the University of virginia before
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The oklahoma police pension and retirement system was scheduled to hear an update on its search for a long/ short equity fund of funds manager at its Feb. 15 meeting. The board would take appropriate action as deemed necessary. Jason Pulos of Asset Consulting Group LLC said his firm was evaluating 34 RFPs at the Jan. 2 meeting.
http://1.usa.gov/wHG9MD
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Brief exclusives
joining the North American operations of UBS, where he worked for 11 years. Hell be the main guy to oversee the execution of my strategy, Nelson Saiers, who joined Alphabet from deutsche bank ag in July 2010, said in a phone interview yesterday. Because all traders report to me now, it was imperative to have a right-hand man with strong managerial skills and who had traded different assets. Alphabet, which has $650 million under management and 32 employees, gained 2.6 percent last year amid record stock market price swings, according to a letter to investors obtained by Bloomberg News, compared with an average loss of 8.3 percent for equity hedge funds, according to Chicago-based hedge fund research inc. The firm returned 4 percent in January. Alphabet, which was started by Jason adler in October 2007 with $11 million, bet that the spread on volatility levels for stocks and other assets worldwide are too wide.
commodITIes
hedge funds boost bullish wagers to five-month high
By DEBARATi ROy
Kelly Bit
lAunches
ex-morgan stanleys roy seeks up to $1 Billion for Fund
ranodeb roy, morgan stanleys former head of fixed income for Asia-Pacific, is raising as much as $1 billion for a hedge fund focused on interest rates, credit and foreign exchange. rv capital management pvt., which Roy is setting up with vickram mangalgiri, a former adviser at pacific investment management co., will start trading in April or May and plans to manage $500 million to $1 billion once its fully funded, Roy said in an interview in Singapore last week. He declined to say when the target may be reached. Roy and Mangalgiri hired rajesh mahadevan, previously head of interest rate and foreign exchange structuring in South Asia for bnp paribas sa, as head of trading strategy, and will set up a research team in india, bringing total staff to as many as 10 in the first phase. Roy recently returned from a trip to the U.S. and Europe, where he marketed the fund to investors including family offices, funds-of-funds and endowments, he said, without giving details.
Hedge funds increased commodity bets to the highest in almost five months on signs that a rescue plan for Greece and faster U.S. growth will buoy demand as supplies shrink for everything from soybeans to copper. Money managers boosted net-long position across 18 U.S. futures and options by 2.9 percent to 956,313 contracts in the week ended Feb. 14, the most since Sept. 20, government data show. Soybean wagers jumped 29 percent to a five-month high. Silver holdings rose for a seventh straight week, the longest advance in almost three years. Sixteen of the raw materials tracked by S&P advanced last week, led by cocoas 8.5 percent gain. Natural gas climbed 8.4 percent, and cattle prices rose 3.2 percent, touching a record. Supplies of copper will trail demand by 376,000 metric tons this year, Barclays Capital said in a report on Feb. 16. Consumption will outpace production for tin and palladium, the bank said. Copper for three-month delivery in London gained 0.7 percent to $8,235.50 a ton today. Shortages are also forecast for soybeans, coffee and cocoa, Rabobank international said in its latest monthly outlook report from January. Wagers on higher crude-oil prices jumped 14 percent to 233,889 contracts, the government said. Thats the highest since May. A measure of 11 U.S. farm goods showed speculators lowered bullish bets in agricultural commodities by 0.4 percent to 453,637 contracts, CFTC data show. Declines were led by cotton. The gauge is still up 66 percent this year. Bets on higher cattle prices climbed 2.2 percent to 88,091 contracts, the highest since mid-November.
Sanat Vallikappen
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mArkeT cAlls
Paulson says Greece may default, spurring euro Breakup
paulson & co., the $23 billion hedge fund whose founder John paulson is seeking to recover from record losses last year, said Greece may need an unprecedented 90 billion euros ($117 billion) to meet funding requirements. We believe a Greek payment default could be a greater shock to the system than Lehmans failure, immediately causing global economies to contract and markets to decline, Paulson estimated in a year-end letter sent to clients this month, a copy of which was obtained by Bloomberg News. The euro is structurally flawed and will likely eventually unravel, it said. it seems likely that the pressure to keep the euro together becomes too great and it ultimately falls apart, Paulson said in the 100-page letter. The firm said its biggest concern are European banks, which have borrowed more than their U.S. counterparts and dont have enough equity to withstand a credit crisis.
John Paulson
Saijel Kishan
Nathaniel E. Baker
Nathaniel E. Baker
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Lilian Karunungan
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reGulATory/comPlIAnce
eu ministers Adopt cds curbs in short-sale law
European Union finance ministers adopted a short-selling law that includes an optional ban on naked credit-default swaps tied to sovereign debt. The legislation, which would also curb so-called naked short selling of stocks and government bonds, was approved at a meeting in Brussels today. Todays decision marks the final stage in the adoption of the law, which was also approved in November by lawmakers in the European Parliament.
Jim Brunsden
Jesse Hamilton
Lindsay Fortado
citigroup inc. will let managers of its hedge funds own part of the business ahead of rules that limit shareholders cash in the unit, Chief Operating Officer John havens said. Employees in the Citi Capital Advisors division, or CCA, will get a significant stake in managing the funds, Havens said in an interview. This will increase, he said, as Citigroup withdraws its own money and attracts outside investors to comply with the volcker rule. Our competitors are an owneroperated model, Havens said during an interview in his 39th-floor corner office at Citigroups Greenwich Street building in Manhattan. it was always in the plans but you have to actually have a business that youre comfortable with to go do it. Havens and Chief Executive Officer vikram pandit, 55, are seeking to replace the companys cash in CCA with funds from outsiders as regulators draft the volcker rules final language. Were trying to create a clientcentric, alternative asset-management business, and this is the final stage of putting that in place, Havens said. Clients like independent asset managers. Former morgan stanley executives Jonathan dorfman and James obrien run CCA, which managed $18.2 billion in private-equity and hedge funds, Citi said in August. The bank had at least $5 billion in the funds, a person familiar with the matter said in May. if the firm wanted to keep $5 billion with CCA and comply with the volcker rules 3 percent cap, the funds would have to contain $161.7 billion from outside investors, or 69 percent more than the banks current market value. Citi didnt provide details about how it would divest its ownership of CCA.
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bruce kovner, co-founder of the New york-based caxton associates lp, gave $500,000 to Restore Our Future, a U.S. political action committee supporting Republican presidential candidate Mitt Romney. david tepper of appaloosa management lp gave the organization $375,000 last month. The group also got $250,000 from Julian robertson, co-founder of tiger management llc.
President Barack Obama returns to New york on March 1 for his first campaign fundraiser with investment bankers and hedge fund managers since asking Congress in his 2013 budget to increase taxes on the wealthy. The $35,800-perperson dinner at ABC Kitchen, the first of the evenings four fundraising events, is being hosted by many of Obamas top Wall Street donors, according to a person familiar with the matter. Sponsors include blair w. effron, partner and co-founder of centerview partners llp; marc lasry, managing partner and founder of avenue capital group;and mark gallogly, a managing principal of Centerbridge Partners. omega advisors inc. Founder leon cooperman and his wife, Toby, have named the Jewish Community Foundation of Metrowest, New Jersey the owners of their $20 million life insurance policy,
according to the New Jersey Jewish News website. The gift is believed to be the largest single contribution ever received by the foundation, the story said. The gift comes from the Cooperman Family Foundation.
Nathaniel E. Baker
hedge funds cares 14th annual benefit, to be held at New yorks Cipriani 42nd Street on March 1, comes at a time when the industrys reputation has endured a number of shocks, much in the same way that it had when the charity hosted its first event in 1998 in the wake of Long Term Capital Management, according to a statement from the organization. As a result, this year Hedge Funds Care is emphasizing that funds improve their reputation through charity work, it said. Joe Torre, the former manager of the New york yankees, will receive the Hedge Funds Care Founders Award at next weeks gala. He is only the third recipient.
Nathaniel E. Baker
The Bloomberg Latin America Investing Conference will give global investors an in-depth look at investment opportunities throughout Latin America. Topics will include currencies, ination, stock markets, real estate investing and strategies for participating in this dynamic part of the world. With Rodrigo Vergara, Governor, Central Bank of Chile, among other notable speakers. To register go to bloomberglink.com/latam.
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long/short equities
FIrm Frigate Ventures lP Varus Capital management Cayman ltd evergreen Capital Partners Pty ltd Center Coast Capital advisors lP Zimmer lucas Partners llC Fund anson investments master Fund lP Varus Fund-eUr Fees australian equities return Fund-a Center Coast Capital Partners lP ZlP Fund lP mAnAGer Bruce winson team-managed tim Hannon dan tutcher stuart Zimmer IncePTIon 7/1/2007 5/1/2010 5/3/2010 8/31/2007 11/1/1999 2011 reTurn 23.7 20.7 18.0 16.2 16.2 2010 reTurn 23.4 N.a. N.a. 22.5 5.3
global macro
FIrm Haidar Capital management llC Friedberg mercantile Group ltd Quantedge Capital Pte ltd North asset management llP titan Capital Group iii lP Fund Haidar Jupiter Fund llC Niagara Friedberg Funds-Niagara legacy Class B Quantedge Global Fund maxQ Fund limited-a Usd Global return Fund offshore ltd (Class ar)-absolute return strategy mAnAGer said Haidar albert d Friedberg leow Kah shin George Papamarkakis russell H abrams IncePTIon 8/31/2000 7/8/2005 10/2/2006 11/29/2002 3/1/2003 2011 reTurn 53.5 39.8 32.9 25.2 21.9 2010 reTurn 28.1 10.1 82.4 -7.5 -40.7
distressed
FIrm ta mcKay & Co inc deltec asset management llC FrontFour Capital Group llC Gso Capital Partners lP man investments aG Fund simplon Partners lP deltec special situations Partners lP FrontFour Capital Partners lP Gso special situations overseas Fund ltd man Prospect mountain ltd mAnAGer thomas a mcKay Peter Coolidge david a lorber team-managed alok makhija IncePTIon 7/1/1990 1/1/2003 12/29/2006 8/1/2005 4/1/2010 2011 reTurn 12.8 12.0 8.6 8.0 5.3 2010 reTurn 24.1 20.0 32.5 17.8 N.a.
fixed-income arbitrage
FIrm Nordic asset management Fondsmaeglerselskab a/s saye Capital management lP Nomura Global alpha llC Barnegat Fund management inc Concordia advisors llC Fund midgard Fixed income Fund ltd spectrum Fund lP NGa Capital Feeder Fund ltd-i Barnegat investments limited-Class B Concordia municipal opportunities Fund iii lP mAnAGer C. lindstrom lage Jeff saye shalabh Garg Bob treue Christopher dillon IncePTIon 9/1/2009 1/1/2003 7/1/2008 1/1/2001 3/31/2006 2011 reTurn 22.5 21.0 15.7 11.1 10.1 2010 reTurn 20.7 72.8 42.1 15.8 -3.6
cta/managed futures
FIrm Fort lP Fort lP Henderson alternative investment advisor ltd inCentive asset management ltd arrowhawk Capital Partners liquid markets llC Fund Fort Global diversified Program Fort Global Contrarian Program Henderson agricultural Fund ltd-sV Usd inCentive Funds Cayman sPC-CommCentive segregated Portfolio-B arrowhawk Commodity stategies ltd mAnAGer yves Balcer yves Balcer ian Bowler rene Braginsky Jennifer Fan IncePTIon 10/31/1993 10/30/2002 9/1/2010 1/25/2010 9/1/2009 2011 reTurn 40.0 28.7 22.0 21.2 15.4 2010 reTurn 34.5 27.8 N.a. N.a. 5.0
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For Web News on Hedge Managers on Bloomberg click {STNI HEDGEMANAGERSWEB <go>}
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cAlendAr
dATe Feb. 28
eVenT moma's david rockefeller award luncheon FX-invest europe GarP's 13th annual risk management Convention informa's UCits for Hedge, mutual & investment Fund managers asiaHedge Forum 2012 100 women in Hedge Funds dinner and Fundraiser BNP Paribas's investor education series: "opportunity Knocking: european distressed" CFa institute's investing in emerging markets 14th annual New york Hedge Funds Care open your Heart to the Children Benefit 13th annual Hedge Funds world middle east argyle executive Forum's 2012 research and Portfolio manager membership Breakfast Bloomberg's starting a Hedge Fund? direct access Partners' Cap intro event Hedge Fund association investor intelligence symposium merlin securities' dallas marketing seminar Hedge Funds Care indoor triathlon CBoe's 28th annual risk management Conference Bloomberg Precious metals Conference 37th annual international Futures industry Conference Florida alternative investment association's inaugural meeting of the americas
FeATurInG Honoring stanley druckenmiller martin schlegel, swiss National Bank; Pierre lequeux, aviva investors; Paul Chappell, C-View. aaron Brown, aQr; attilio meucci, Kepos Capital; Craig Broderick, Goldman sachs. rhodri mason, man investments; Jerome lussan, laven Partners. Joe Zhou, ortus Capital; max Gottschalk, Gottex; Ken stemme, larch lane. to benefit skillForce. moderated panel with hedge fund managers on the current opportunities in the distressed space. (repeats march 2 in washington, dC) stephen Jen, slJ macro Partners; donald lindsey, George washington University. to honor Joe torre, former New york yankees manager. Jeff tarrant, Protege; daniel Booth, saudi aramco; abbas Hashimi, Qatar Family office. topics of discussion include european banking crisis, emerging markets. moderator Phillip Chapple, KB associates, to host six panel discussions. investor roundtable session. Keynote by sheryl mejia on developing a marketing message. Closed-door manager marketing seminar and investor panel teams of three compete in 1,000 meter row, stationary bike ride and 2 mile treadmill run. Pav sethi, Gladius; som dasgupta, linden advisers; markok Kolanovic, JPmorgan. James rickards, tangent Capital; Jeffrey Christian, CPm Group. "Nine hundred of the top names and faces in the industry." one-on-one meetings between "institutional allocators and best-of-breed hedge fund managers, matched via investor mandates."
locATIon New york (exact location provided to attendees) radisson Blu, Zurich marriott marquis, New york the radisson martinique, New york Jw marriott Hotel, Hong Kong Hm tower of london New york (exact location provided to attendees) New york marriott downtown Cipriani 42nd street, New york Jumeirah Beach Hotel, dubai New york (exact location provided to attendees) Bloomberg office, london New york (exact location provided to attendees) Proskauer rose office, New york dallas (exact location provided to attendees) Columbia University, New york Hyatt regency Coconut Point, Bonita springs, Fla. rubin museum of art, New york Boca raton resort & Club, Boca raton, Fla. Biltmore Hotel, Coral Gables, Florida
Feb. 28 Feb. 28-29 Feb. 28-29 Feb. 29 Feb. 29 march 1, 3:30pm march 1-2 march 1 march 5-8 march 6 march 7 march 7 march 7, 5pm march 8 march 10 march 11-13 march 13 march 13-16 march 18-20
www.fxinvesteurope.com www.garp.org www.informaglobalevents.com www.hedgefundintelligence.com www.100womeninhedgefunds.org www.bnpparibasspcapintro.com www.cfainstitute.org [email protected], +1 212-991-9600 x342, www.hedgefundscare.org www.terrapinn.com www.argyleforum.com http://bloom.bg/yaB3ig andrew saunders, [email protected] www.thehfa.org simone sobel, [email protected] Jen schutten, [email protected] www.cboermc.com/index.cfm www.bloomberglink.com/metals www.futuresindustry.org/boca-2012.asp Fund managers should email pitchbook, ddQ, monthly and quarterly letters, firm aum to [email protected] by Feb. 24.
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calendar
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This document is being provided for the exclusive use of JONATHAN YEOH at KEEFE, BRUYETTE & WO
02.21.12 www.bloombergbriefs.com Bloomberg Brief | Hedge Funds
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stephen Jen on when and how the current equities rally might end
stephen Jen, managing partner and founder of London-based slJ macro partners, spoke to Bloombergs Nathaniel Baker about his views on the markets and why he thinks the current equities rally will run its course later this year.
pullbacks could be shallow. Q: does that mean the whole risk on/ risk off dichotomy is off? a: No, on the contrary. i think the tensions between risk-on and risk-off could elevate later this year. The LTRO has bought time for the European banks but has not dealt with the over-leveraged and under-capitalized nature of the entire European banking system. Greece has demonstrated that it is unwilling and unable to carry out needed reforms. A disorderly default by Greece seems probable sooner or later. The LTRO has truncated the left tail for Europe for the time being. But the mean of the distribution will remain low and weak. At the same time, China continues to slow. The latest data suggest that growth may be weaker than the Q4 GDP suggests. Q: so you dont think this rally is going to last? a: i dont think this is going to last. i dont know when the turning point will be, but i believe it is going to come from economic data that will surprise on the downside. My focus right now is on China and other emerging markets economies. Q: is that where we might see a catalyst for a downturn? a: Mainly from emerging markets. The part of world, in terms of data, that has
Q: lets talk about your views on the markets. You were short euro/long u.s.? a: Until the first part of January that was our posture, but we realized that global liquidity is such a powerful force especially after the FOMC meeting that this is to be respected, that investors shouldnt stand in the way of this tsunami of liquidity. Q: so how have you changed your views? a: We try to be flexible. We still think the global economy is going to experience very difficult moments this year, especially in emerging markets. But its only February; early in the year. We need to be sure we respect the uncertainty and the timing of the potential changes in the global activities numbers. Last year was a good example. it was a year of two halves; the first part of the year and the second part were completely different in character. Not just in terms of GDP but also how the markets traded and were correlated. We could see a replay of that this year. We see the GDP sharpe ratio the ratio of expected GDP growth to its volatility to remain inferior from where it was in the past. This should also suppress the Sharpe ratio of the underlying portfolios. Q: okay a: To a large extent, the Feds stance on QE3 will play an important role in both the direction and timing of changes in market trends. Q: it sounds like youre sitting on cash then, rather than taking specific bets? a: We are cautiously positive on risk for the time being, but are fully aware that the global economy could easily experience a setback. We suspect some macro hedge funds may have the same posture. The lack of full positioning on risk assets point to a possibility that this risk rally could potentially last a bit longer and the
not been a determining factor for risk assets. They havent driven the markets either way. Downside surprises should come from there. Chinas activity data for January was remarkably weak in terms of trade, electricity usage, money growth, housing prices and rent. While a good part of this weakness may reflect the calendar effect associated with Chinese New years, it is possible that part of it reflects a genuine economic slowdown. Specifically, about half of Chinas real GDP growth comes from investment and more than a quarter of that is construction. if the housing market remains weak and construction slows, there will be consequences for GDP, and the Beijing policy makers will be compelled to react. The corresponding changes in the composition of demand growth will in turn have consequences for other countries. Q: speaking of which, where does the u.s. stand in all of this? a: The dovish bias of the Fed is remarkable and QE3 will dictate the tone. Datawise, there have indeed been encouraging signs of a recovery in the U.S. manufacturing sector. The labor market also seems to be in recovery. However, the speed of economic growth will not likely exceed trend growth. Therefore it is not clear that the U.S. economy, if it indeed only grows at trend, will be strong enough to lift the rest of the world.
Age: 46 college/university/Grad school(s): Ph.D. in economics from the Massachusetts Institute of Technology. B.S. in electrical engineering (Summa cum laude), University of California, Irvine. Professional Background: Economist at IMF (1992-1996); Global head of currency research at Morgan Stanley (1997-2009); managing director of macro and currencies at Bluegold Capital (2009-2011); founder of SLJ Macro Partners (since 2011) Family: Wife and two children. hometown: Born in Taipei, Taiwan. current residence: London
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