Hedge Fund News Wrap: Week Ending 8/30/13

Hedge Fund Overview: Funds Down 0.57% MTD

The Bank of America Merrill Lynch Investable Hedge Fund Composite Index was down 0.57 percent for the month as of August 21st, outperforming the S&P 500 which was down 3.6 percent.

Convertible arbitrage was the best performing strategy, posting gains of 0.16 percent. Equity and long/short performed the worst, falling 0.93 percent.

Overall, hedge funds continue to suffer this year, with year-to-date gains of only 3.78 percent, compared to the S&P’s 15 percent over the same period of time.

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Ackman Sells 18% Stake in J.C. Penney, Loses 50%

J.C. Penney’s biggest investor, Bill Ackman, has decided to sell his 18 percent stake in the company at $12.60 a share for a total of $492.3 million. The selling price is nearly half of the average $25 a share he paid when he first invested in the company in 2010.

The move comes two weeks after Ackman resigned from Penney’s board of directors amid an unusually public feud with his fellow board members. In addition, the sale ends a three-year attempt by Ackman to revamp the struggling retailer.

Last week, in a letter to investors, Ackman called J.C. Penney one of his hedge fund’s “failures” and claimed that retail is not his strong suit.

Ackman’s departure is a major change in the ownership structure of the company. After Ackman’s Pershing Square Capital, the largest owner will become Perry Capital, with its 16 million shares, or 7.3 stake stake.

Recently, J.C. Penney adopted a one year “poison pill” to prevent any coercive takeover attempts by limiting an investor’s stake to only 10 percent. According to Reuters, “Analysts widely interpreted the policy as a move by Penney to avoid another distracting fight with an activist at a time it is trying to win back shoppers after sales fell hard last year and are continuing to fall this year.”

Following Ackman’s announcement on Monday, Penney’s shares were down 2.6 percent in after-hours trading.

See detailed coverage from:

Huffington Post

The Wall Street Journal




Hedge Fund Karsch Capital to Close after 13 Years

After 20 years of being involved in the hedge fund industry, Michael Karsch has decided to shut down his 13-year-old Karsch Capital Management firm in order to “think about the next chapter” of his career.

Karsch has not mentioned what he plans to do next, but in a letter to investors, the hedge fund manager wrote that he is “very excited about the opportunities that lie ahead.”

In the same letter, Karsch wrote that he is planning to return 95 percent of the fund’s $1.8 billion in assets until the end of next month, while the rest will be distributed until January 2014.

Since its inception, Karsch Capital has continuously outperformed the broader market, as it has returned 94 percent compared to the S&P’s 55 percent over the same period of time.

Karsch Capital’s main fund returned 6.1 percent this year through August 23rd.

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SAC Capital Loses Loyal Investor amid Investigation

Ed Butowsky, the self-described “last man standing” for SAC Capital, has had a change of heart after a talk with his lawyers. The Dallas money manager of Chapwood Investments elected to file redemptions both for his clients’ money and for his own after his legal team warned that the assets could become entangled if SAC is convicted of insider trading.

Earlier this month, Butowsky told the Wall Street Journal that he felt “like Will Smith in ‘I Am Legend’ when everyone else has died. … I am the last man standing.”

Butowsky said he filed his redemption quietly, as SAC has “more important things to deal with than Ed Butowsky.” Regardless, Butowsky remains an avid supporter for the hedge fund firm, telling The Wall Street Journal that he would put his money “back in if SAC will take it.”

As the investigation into SAC continues, investors are believed to have filed redemptions for most of SAC’s remaining $1 billion in outside capital. This would leave the firm with about $8 billion compared to the original $14 billion it started with earlier this year.

See detailed coverage from:

The Wall Street Journal




Note: TradingScreen will not publish a “Monday Morning Briefing” on September 2nd, 2013 due to the Labor Day holiday.