Hedge Fund News Wrap: Week Ending 8/1/2014

Deadline to Pay Hedge Fund Passes, Argentina Defaults

On midnight Wednesday, Argentina officially defaulted on the debt it owes to finance1creditors and bondholders. The nation missed the deadline to pay the $539 million it owes in interest to creditors from its previous default in 2001.

A U.S. federal judge had ruled that the interest payment could not be made unless investors, led by hedge fund Elliot Management, received the $1.5 billion they are claiming. A court-appointed mediator was put in place to negotiate deals between the hedge funds and Argentina, but both sides failed to come to a mutual agreement.

Daniel Pollack, the court-appointed mediator, wrote in an e-mail statement that “real people” are likely to suffer from Argentina’s default.

“The full consequences of a default are not predictable, but they certainly are not positive,” Pollack wrote.

According to FINalternatives, Argentina has about $29 billion of bonds sold in international markets and denominated in foreign currencies with cross-default provisions. Therefore, Argentina would have to pay back the entire amount, plus unpaid interest, if 25 percent of holders demand their money back. As of now, those potential liabilities are equal to the country’s foreign reserves.

While the difficulties following a default hover over Argentina, some of the country’s leaders fail to accept the default rating by Standard & Poor’s.

On Thursday, Axel Kicillof, Argentina’s economy minister, called it “atomic nonsense” to say that the country was in a default in a televised announcement.

According to the New York Times, Jorge Capitanich, the cabinet chief, called it “an absurd lie” that undermined the country’s attempt to restructure its debt after its previous default in 2001.

There has been no mention of when hedge funds and Argentina will resume talks.

 

See detailed coverage from:

DealBook

FINalternatives

The Economist

 

 

Ackman Admits to Herbalife Presentation “PR Failure”

In a rare display of admittance, hedge fund manager Bill Ackman acknowledged that his Herbalife presentation last week was a complete failure.

In an interview with Bloomberg News, the hedge fund titan acknowledged that his lengthy presentation on Herbalife at the AXA Equitable Center failed to deliver a “deathblow” to the company and was a “PR failure.”

“I think we raised expectations. People were looking for the dead body and the smoking gun, and instead what they got was a three-hour detailed regulatory presentation,” said Ackman.

During “the most important presentation” of his career, Herbalife’s stock rose a startling 25 percent, as Ackman shared hundreds of documents and slides to show how exactly the nutritional supplement operates as a pyramid scheme.

Currently, Ackman’s hedge fund has a $1 billion short position on Herbalife.

Christine Richard, the former journalist who helped Ackman with his presentation noted that “the combination of the overhyping of the presentation and the length buried some of the material.”

While Herbalife continues to dismiss Ackman’s claims as “completely false and fabricated,” the hedge fund manager most likely will not back down anytime soon.

 

See detailed coverage from:

FINalternatives

Quartz

Business Insider

 

 

Hedge Fund Third Point Reopens for Short Time

Seven months after returning capital to clients for the first time, Dan Loeb’s Third Point LLC is opening its doors once again to new investors.

According to The Wall Street Journal, Loeb told investors that the firm will accept more money in its flagship fund through October 1st to pursue specific investments. Loeb did not specify what the investments were or how much the fund would accept.

The fund returned about $1.4 billion, or 10 percent of its assets at the time, to investors by the end of last year to moderate its growth.

The $15 billion hedge fund gained 6 percent in its flagship fund for the year (through June), surpassing the 4.4 percent average return by event-driven funds, according to HFRI Indices.

 

See detailed coverage from:

FINalternatives

ValueWalk

The Wall Street Journal

 

 

Steven Cohen Still Doing Well After SAC Guilty Plea

Despite a guilty plea, mandatory rebranding, and employee exits, Steven Cohen is still beating hedge funds as his profits soar.

The billionaire, who changed the hedge fund SAC Capital Advisors into a family office, has gained 9 percent this year, beating the average return of 2.5 percent by the industry this year (through June).

Last year, SAC Capital Advisors paid a $1.2 billion penalty to the federal government as part of a guilty plea in an insider trading investigation that spanned more than ten years. Eight former SAC Capital employees were found guilty of insider trading.

As a result, Cohen’s once-prominent hedge fund restructured into a family office, managing his $10 billion wealth exclusively.

Now, the renamed firm, Point72 Asset Management, has generated close to $1 billion in the first six months of the year, according to two people briefed on the matter. Last year, SAC Capital made about $2.3 billion in profits.

The new firm has close to 850 employees, and only one Wall Street firm, Deutsche Bank, has chosen to stop lending money and serving as a prime broker to Point72, according to CNBC.

Despite Preet Bhara, the United States attorney in Manhattan, calling SAC a “magnet for market cheaters,” Cohen continues to do what he has done best for the more than two decades: making a staggering amount of money from trading stocks and bonds.

 

See detailed coverage from:

Bloomberg News

DealBook

CNBC