Hedge Fund News Wrap: Week Ending 9/26/14

SEC Finds Misrepresentations with Hedge Funds 

According to Andrew Bowden, the director of the Securities and Exchange Commission, the agency has found a number of “deficiencies” in the 185 hedge funds that were examined.

At an investment advisory conference, Bowden stated that regulators have discovered that some funds are engaging in “flip-flopping,” which according to the Wall Street Journal, is when funds “boost valuations by changing the way they measure holdings several times a year.” In some cases, it also includes failure to comply with regulations covering the custody of assets.

As a result, hedge funds have been collecting higher fees because they are based on the fund’s performance.

“One of the most common findings we have are that the valuation and policies and procedures aren’t highly evolved and aren’t very specific,” Bowden said.  “We’ll see people from quarter to quarter or year to year changing their valuation methodology and managing to pick the one that leads to highest valuation in their funds.”

The SEC is close to finishing examinations following the 2010 Dodd-Frank Act, which gave the agency power to oversee hedge funds and buyout funds with more than $150 million in assets.

 

See detailed coverage from:

The Wall Street Journal

Bloomberg News

Barron’s

 

 

Paulson Urges Family Dollar to Sell 

Hedge fund manager John Paulson has quietly urged Family Dollar to sell itself, according to FINalternatives.

Although Paulson later told the Securities and Exchange Commission that his hedge fund’s stake in the discount retailer was passive, Paulson advised Family Dollar CEO Howard Levine to sell during an October 2013 meeting, and then again in a letter in January 2014.

Paulson & Co., which now has an 8.6 percent stake in the company, told Bloomberg News in an e-mail statement that it didn’t exert pressure on Family Dollar.

Paulson’s passive lobbying efforts put to focus how hard investors can push management before triggering more stringent disclosure requirements for activists that were put in place to protect companies and stakeholders, according to Bloomberg News.

“In communicating its opinion to Family Dollar on alternatives to increase value for its stockholders, Paulson at all times left the decision to the Family Dollar board, which was free to rely on its directors’ best judgment on the right course of action,” the company said. “Paulson did not take any action or discuss taking any action other than expressing its opinion.”

 

See detailed coverage from:

FINalternatives

Bloomberg News

The Wall Street Journal

 

 

Finance Offspring Get Their Own Hedge Fund

As FINalternatives puts it, “launching your own hedge fund may be a rite of passage for the children of Wall Street.”

According to the Wall Street Journal, children of prominent finance figures are starting their own hedge funds, including the son of Oaktree Capital founder Howard Marks, and the son of Investment Banker Ken Moelis.

Andrew Marks, the son of Howard Marks, recently told investors and industry executives that he expects as much as $200 million in funding from his father and “friends and family.” The fund, which has been named “Anicca” after the Buddhist doctrine of impermanence, is expected to launch at the end of this year or the following year

Jordan Moelis, the son of Ken Moelis, is expected to launch his own fund within the next year in Los Angeles.

The fields of finance are one of the most lucrative and unforgiving, but with a nice cushion provided by “friends and family,” these young men are willing to wager part of their family fortune.

 

See detailed coverage from:

The Wall Street Journal

 Gawker

FINalternatives