Hedge Fund News Wrap: Week Ending 05/08/15

Daniel Loeb Strikes Back Against Buffett’s Criticism of Hedge Funds
(DealBook) – To many Americans, the billionaire investor Warren E. Buffett is the “Oracle of Omaha.” To another billionaire investor, Daniel S. Loeb, he is a hypocrite.

Mr. Loeb, who runs the $17.4 billion hedge fund Third Point, told an audience of hedge fund faithful on Wednesday that Mr. Buffett “has a lot of wisdom, but I think we need to be aware of the disconnect between his wisdom and how he behaves.”

He was taking aim at a public bet that Mr. Buffett made against the hedge fund industry, which Mr. Buffett believes cannot outperform the broader market and, specifically, the Standard & Poor’s 500-stock index.

Speaking to shareholders at an annual gathering for his company Berkshire Hathaway over the weekend, Mr. Buffett pointed out that the S.&P. 500 had gained 63.5 percent since 2008, while an index of hedge funds had increased by 19.6 percent over the same period.

Read the entire article at DealBook
More coverage: Reuters and Fortune

Hedge Fund Star David Einhorn Calls Fracking Companies a Joke

(CNNMoney) – A top hedge fund manager thinks America’s oil fracking companies are a joke. David Einhorn, founder of Greenlight Capital, gave a humorous speech that was nothing short of a takedown on big oil Monday at the Sohn Conference in New York. His conclusion: oil drilling companies are a terrible investment.

“A business that burns cash and doesn’t grow isn’t worth anything,” Einhorn said. Einhorn is famous for calling out big companies as overhyped or worthless. He threw darts at Lehman Brothers right before the bank shuttered its doors during the financial crisis, although some of his recent bets haven’t done as well.

On Monday, he argued that oil drillers spend too much and can’t turn a profit in an environment of low energy prices. Oil has dropped from $100 a barrel last summer to under $60 today, causing the stocks of many drilling companies to plummet.

Read the entire article at CNNMoney
More coverage: Wall Street Journal and The Financial Times

Marathon Sees Prepa Debt Among ‘Best Ideas’ in Gundlach Echo

(Bloomberg Business) – Marathon Asset Management’s chief executive officer said debt of Puerto Rico’s public power utility is among the distressed-debt firm’s best investments.

“We think it’s a very high rate of return for Prepa,” Bruce Richards, head of the hedge-fund firm that manages about $12 billion, said in an interview on Bloomberg Television at the SkyBridge Alternatives Conference in Las Vegas. “It’s one of the best ideas that we have in our fund.”

Richards is the second money manager this week to tout the struggling U.S. territory’s bonds. DoubleLine Capital’s Jeffrey Gundlach this week compared Puerto Rico obligations to buying mortgage-backed securities in 2008 which he said turned out to be a “fantastic investment.” Fund manager Pacific Investment Management Co. took the opposite approach, warning in a blog posting that the island faces “daunting challenges.”

Read the entire article at Bloomberg Business
More coverage: The Financial Times and HedgeCo