Hedge Fund News Wrap: Week Ending 9/12/14

Hedge Funds Cut Exposure, Performance Falls in August

In August, hedge funds returned 1.4 percent, making the industry’s year-to-date finance1return 4 percent according to eVestment. Hedge funds continue to lag behind the broader market, as the Standard & Poor’s 500 Index returned 4 percent at the end of August at an all-time high.

Hedge funds reduced their market exposure after July’s volatility, as average gross market exposure fell below 46.6 percent, which is the lowest level in years.

In August, managed future funds, macro funds, and long/short equity funds were among the month’s best performers with an average return of 2.03, 1.68, and 1.58 percent, respectively.

Distressed funds dipped 0.53 percent and relative-value credit funds shed 0.09 percent in August.

 

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FINalternatives

Opalesque

Barrons

 

 

Hertz Offers Three Board Seats to Icahn

On Thursday, Hertz Global Holdings and Carl Icahn announced an agreement-in-principle that put their corporate battle on hold.

The rental car company has agreed to give activist investor, Carl Icahn, three board seats in exchange for avoiding any distracting battle over control of the board.

Two of the three new board members will focus on finding a new chief executive to lead Hertz, following an announcement from its current chief executive officer stating that he was stepping down for “personal reasons.”

In the past, Icahn has expressed a “lack of confidence in [Hertz’s] management.”

In addition, Hertz has amended its poison pill, a shareholder rights plan that would prevent any one shareholder from gaining control of the company, raising the threshold from 10 percent to 20 percent.

As of this week, Icahn has an 8.5 percent stake in the company.

The company’s stock climbed 4.76 percent on Thursday, after news was published regarding Icahn’s new board members.

 

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DealBook

Business Insider

MarketWatch

 

 

Ex-SAC Trader, Martoma, Gets Nine Years in Prison

On Monday, former SAC Capital portfolio manager Mathew Martoma received a nine-year sentence for his role in an insider trading scheme. Martoma will also have to forfeit $9.4 million.

Last year, prosecutors alleged that Martoma used negative information about a confidential drug trial from pharmaceutical companies Elan Corporation and Wyeth between 2006 and 2008. The information allowed SAC Capital to avoid losses of $276 million, as they began to short stocks in the companies before the news was made public. In February, Martoma was found guilty on three counts: two securities and one conspiracy fraud.

In a statement, U.S. Attorney Preet Bharara wrote, “Today’s sentence of a lengthy prison term is well-suited to the audacity of the illegal trading in this case. The long and short of Mathew Martoma’s trading is that he traded his liberty, his name, and his time with his family for what in the end is nothing.”

Martoma’s nine-year sentence is just two years shy of former hedge fund manager, Raj Rajaratnam, who is currently serving an eleven-year sentence for insider trading in the notorious Galleon case.

Martoma has asked to be transferred to a federal prison in Miami to remain closer to his family. The decision will be made by the Prison Bureau officials.

 

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DealBook

CNBC

Business Insider

 

 

Washington Trading Probe Broadens to Hedge Funds

A federal investigation has broaden to include several hedge funds, according to CNBC.

An investigation is looking into whether Height Securities violated any securities laws by sharing illegally obtained information about a government health care policy announcement. Investigators allegedly found communications between Height Securities and at least four hedge funds, including the now-defunct SAC Capital Advisors and Citadel LLC.

A lawyer for Height commented to the Wall Street Journal that the information was “provided by the government more than a year ago.”

Katie Spring, a Citadel spokeswoman said, “Our communication was for the sole purpose of verifying information contained in what we understood to be a broadly disseminated email, and was part of our compliance process specifically undertaken at the behest of our compliance team.”

It is not illegal for investors to talk to other companies about their research notes. According to MarketWatch, it would be normal for investors and individuals at Height Securities to do so before making a large trade based on such a note. However, investors could be held liable for violating insider-trading rules if they were aware or should have been aware that the information was obtained illegally.

 

See detailed coverage from:

The Wall Street Journal

MarketWatch

CNBC