Hedge Fund News Wrap: Week Ending 10/25/13

Third Point to Return $1.4 Billion to Investors

For the first time in its 18-year history, Dan Loeb’s hedge fund, Third Point LLC., will return as much as $1.4 billion to investors by the end of the year.

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In a third quarter letter to investors, Loeb writes that the hedge fund will return 10 percent “in an effort to moderate this growth.” The growth is $14 billion in assets under management this year, helped by strong performance from its flagship Partners fund and Ultra fund.

Third Point is following in the footsteps of other large hedge funds, such as Moore Capital Management and Tiger Global Management, who are either returning money to investors or closing their doors to new investors.

Third Point is among one of the few, top-performing hedge funds this year, with gains of 18 percent year-to-date. According to the HFRI Index, hedge funds are up 5 percent year-to-date. The S&P 500 is up nearly 20 percent year-to-date.

 

See detailed coverage from:

Business Insider

DealBook

FINalternatives

 

SAC Cuts Six Teams, Closes London Office

As it continues to face insider trading charges, SAC Capital continued its retrenchment by eliminating six trading teams in the U.S., and by closing its London office.

An internal memo by the firm’s president, Tom Conheeney, revealed these changes, as he acknowledged for the first time that the criminal insider trading charges would change the way SAC operates.

In the memo, Conheeney wrote:

“As our negotiations with the government have unfolded, it has become clear to us that the outcome the government is demanding is likely to have a greater than first anticipated impact on the firm…We have concluded that we must operate as a simpler firm and reduce our capital allocations. This was not something we had been contemplating.”

Allegedly, the embattled hedge fund is in the process of negotiating a settlement with federal prosecutors. Various news sources believe that the deal will require an admission of guilt and the firm to pay a record $1 billion fine.

Over the months, SAC has lost most of its outside investments, leaving the firm to manage Cohen’s $9 billion investment in the company.

At it’s peak, the firm had more than $50 billion in assets under management.

 

See detailed coverage from:

DealBook

FINalternatives

Bloomberg News

 

Second Hedge Fund Takes Aim at Sotheby’s

According to The Wall Street Journal, “Sotheby’s doesn’t just have an activist problem. It has a two-activist problem.”

In the beginning of October, Third Point’s Dan Loeb pushed for change at Sotheby’s, citing a “lack of leadership” in a scathing letter to management.

Now, the company’s third-largest shareholder, Marcato Capital Management, is working behind the scenes to push for change as it urges Sotheby’s to sell its properties in London and New York.

In addition to selling property, the hedge fund wants Sotheby’s to unlock the capital it uses in its smaller art financing and art dealing business.

Marcato believes that these changes will free up $1.3 billion in cash, which would be enough to buy back nearly a third of the company’s stock.

In response to these dual approaches, spokesman Anthony Gully said, “Sotheby’s is committed to healthy two-way communication with its investors and welcomes thoughtful suggestions as we pursue our common goal of a strong, growing, competitive Sotheby’s open to new opportunities.”

Communication between public companies and activist hedge funds isn’t always healthy, as companies are often pressured to make radical, “share-boosting” changes.

 

See detailed coverage:

FINalternatives

Bloomberg News

The Wall Street Journal

 

Barclays to Pay $297 Million to U.S. Hedge Fund

On Friday, Barclays Plc was found liable for breach of contract in a lawsuit filed by a U.S. unit of the hedge fund, Black Diamond Capital Management LLC. The hedge fund seeks $297 million from the bank.

According to Reuters, Barclays disagrees with the decision and is considering an appeal against it.

According to the lawsuit, the British bank had defaulted on a $40 million collateral call it made at the height of the financial crisis in 2008. Barclays disagreed on the amount owed, and returned $5 million to the hedge fund two days after the call was made.

Barclays was found guilty of breaching the contract by not making the $5 million payment on time and by not following the procedures for disputing a collateral call, which would have required the bank to make the $40 million payment first before disputing it.

Barclays’ reputation continues to be marred by a series of scandals and regulatory investigations.

 

See detailed coverage from:

Huffington Post

Bloomberg News