Hedge Funds News Wrap: Week Ending 9/19/14

The California Public Employees’ Retirement System has decided to divest its
entire $4 billion investment, which includes 24 hedge funds and six fund-of-funds, stating that its exit was “an effort to simplify its assets and reduce costs.”

The $298 billion pension paid $135 million in fees this year for hedge fund investments that earned 7.1 percent, which only contributed 0.4 percent to its total return.

Chief Investment Officer Ted Eliopoulos told Bloomberg News, “We do not believe for Calpers’ scale, that we could grow the hedge fund program to a scale that would be meaningful.” Eliopoulos also added, “Our hedge fund allocation was quite small. It did not offer us the ability or the promise to effectively diversify or hedge any meaningful portion of our portfolio.”

According to the New York Times, the size of Calpers investment in minuscule, but losing it is a cause for concern for the hedge fund industry because Calpers is an established trendsetter among public pension plans.

 

See detailed coverage from:

The New York Times

Forbes

Bloomberg News

 

 

Sears Receives Lifeline from CEO’s Hedge Fund

In a regulatory filing, Sears Holdings Corp. announced that it would be borrowing $400 million from Chief Executive Edward Lampert’s hedge fund, ESL Investments. The lifeline will help the struggling retailer remain afloat through the end of the year.

Sears has made efforts to stanch its financial problems, as the company reported a loss of $975 million for the first half of the year.

Over the last couple of years, Sears has closed dozens of underperforming stores and has tried to generate brand loyalty among customers through personalized deals.

Sears received the first $200 million of the loan on Monday, and will receive the remaining amount on September 30th. The loan, which will mature on December 31st, can be extended until the end of February.

 

See detailed coverage from:

FINalternatives

The New York Times

MarketWatch

 

 

Former Amaranth Trader Settles with US CFTC

A former energy trader of the now-defunct Connecticut-based hedge fund, Amaranth Advisors, has settled with the United States Commodity Futures Trading Commission after being accused of manipulating the price of natural gas future contracts traded on the New York Mercantile Exchange through large sell orders in 2006.

Brian Hunter, who was the lead energy trader at Amaranth, has agreed to pay a $750,000 fine.

A Senate committee report published after the $6.6 billion collapse of Amaranth determined that the firm controlled as much as 40 percent of all outstanding winter gas contracts on the New York Mercantile Exchange.

Hunter is barred from trading natural gas futures or any natural gas-linked financial instrument in the daily closing period for such a contract. He is also prohibited from trading in the settlement period for the last day of trading in al products regulated by the CFTC.

 

See detailed coverage from:

Reuters

Financial Times

 

 

SEC Sues Former Hedge Fund Manager for Misappropriating Fees

The United States Securities and Exchange Commission has sued a former hedge fund manager who allegedly took excess management fees fro the accounts of fund clients to remodel his multi-million dollar home and buy himself a Porsche.

Sean C. Cooper, the former hedge fund manager of WestEnd Capital Management, allegedly pocketed $320,000 in investor funds.

“Cooper betrayed the hedge fund’s investors by lining his own pockets with fund assets that he had not earned,” said the SEC’s Marshall Sprung. “His fraud went undetected because WestEnd had no internal controls to limit Cooper’s ability to withdraw excessive amounts from the fund.”

The firm agreed to pay a $150,000 penalty and has fired Cooper.

 

See detailed coverage from:

HedgeCo

Opalesque

FINalternatives