Hedge Fund News Wrap: Week Ending 2/21/14

Former Two Sigma Investments Analyst Charged with Stealing Data


Kang Gao, a former hedge fund analyst from Two Sigma Investments, has been charged with stealing confidential data from his previous employer.

The felony charges against Gao, 28, include computer trespass, unlawful duplication of computer-related material, and criminal possession of computer-related material.

According to the complaint filed by Two Sigma, the firm has reason to believe that Gao planned to take the confidential information “to a new employer, either one of Two Sigma’s competitors in the United Kingdom, or to start his own business in China.”

In the complaint, Two Sigma said it fears that Gao will attempt to profit from the information he allegedly stole if he is released from jail.

The complaint says, “Because the dissemination and misuse of Two Sigma’s trade secrets would cause irreparable harm to its business, and Two Sigma has the right to retrieve both that information and the compensation it has paid Gao, plaintiff respectfully requests that this court temporarily restrain Gao from further illegal activity until a hearing is held.”

Benjamin Yu, a lawyer for Gao, said his client has pleaded not guilty to all charges.


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Bloomberg News



Hedge Fund Greenlight Capital Goes After Blogger

David Einhorn’s Greenlight Capital has filed a lawsuit against investment research and blogging website, Seeking Alpha, to reveal the identity of a blogger who disclosed the fund’s investment in Micron Technology.

The information, which had not been made public, was posted on the website by a user with the pseudonym, “Valuable Insights.”

According to a report by ValueWalk:

“Sometime prior to 9:32 AM on November 14, 2013, Valuable Insights posted ‘Expect one mega hedge fund rock star to show up as [Micron] holder today, not Ackman, Icahn or Loeb . . . .’ Valuable Insights then followed up that post by giving hints to other users of Seeking Alpha. First, he or she posted ‘Hint…this hedge fund has experience in consolidating (oligopoly) tech industries….’ He or she continued: ‘Hint…would not mention if fund added more than 2 or 3 positions a quarter….’ At or around 9:32 AM, after the original and follow-up messages had been posted by Valuable Insights, Seeking Alpha user ‘Dr. Joseph Haluska’ suggested ‘Einhorn,’ referring to Greenlight’s President and co-founder, David Einhorn. Valuable Insights responded at 10:15 AM, confirming that Greenlight was the Micron shareholder referred to in its earlier posts with the statement: ‘The Dr. is in…you heard it here first.’ ”

Greenlight had wanted to keep the information confidential, and planned to reveal it on November 21st. In the complaint, Greenlight contends that the disclosed information caused Micron’s share price to rise immediately, leading the fund to pay higher prices for its Micron securities.

So far, Seeking Alpha has no intentions of revealing the identity of the blogger.


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ABC News




Survey Says Hedge Funds Could Reach $3 Trillion in 2014

According to Deutsche Bank’s annual alternative investments survey, hedge funds could top $3 trillion in assets in 2014.

In 2013, hedge funds managed $2.6 trillion in assets, and expect to see $171 billion in net flows and $191 billion in performance-related gains this year.

“The hedge fund industry is predicted to reach a record $3 trillion by 2014 year-end, driven by significant inflows, most notably from institutional investors,” said Deutsche Bank’s prime brokerage co-head, Barry Bausano.

Last year, the hedge industry rounded off a lackluster year with gains of less than 10 percent. The S&P 500 rose 30 percent over the same period of time. However, it seems that the underperformance isn’t discouraging investors: 80 percent of survey participants said they were “happy” with the lower returns, and more than half of the ones polled plan to raise their hedge fund allocations this year.


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Investment News 



More Hedge Funds Explore Advertising After Ban Lift

Although hedge funds have been able to advertise since the ban lift last September, few have tested the waters.

However, Balyasny Asset Management is one of the few major funds to try their hand at advertising.

In the most recent issue of Pension & Investments, the $4.3 billion fund ran a half-page ad showing skiers and snowboarders on a snow-covered mountain. The tagline read, “Performing In All Conditions,” and the kicker, “Providing Strong Risk Management & Absolute Returns Since 2001.”

According to DealBook, “years of lackluster performance and growing competition for institutional investors like pension funds have made hedge funds warm to the idea of branding. Just do not call it advertising.”

Balyasny follows in the footsteps of TopTurn Capital, which released a commercial featuring surfers and relating the concept to managing money.

Other well-known funds, such as Ray Dalio’s Bridgewater Associates, have tried their hand at advertising in a less direct way. Dalio’s fund posted a 30-minute YouTube video back in September called, “How the Economic Machine Works.”


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Hedge Fund Alert