31/08/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 31 August

NEWSPAPERS AND WIRES
A group of hedge funds and investment firms that hold debt insured by a business of Ambac Financial Group sought in court Monday to stop cash from flowing out of the beleaguered bond insurer to its parent, reports the Wall Street Journal. The plaintiffs, including Aurelius Capital Management, Fir Tree, King Street Capital, Monarch Alternative Capital and Stonehill Capital Management, hold more than $1bn in mortgage securities or other debt insured by Ambac Assurance Corp, the main operating business of Ambac Financial, they said in a statement. On Monday, the funds filed a motion in a state court in Wisconsin seeking to clarify they had a right to sue Ambac Financial to stop it from receiving cash dividends and other transfers from Ambac Assurance while policy holders that have claims on Ambac-insured securities haven't been paid in full. 

Almost half of all hedge fund managers are bearish about the US stock market, up from 33% a month earlier, according to a new report released on Monday, the Economic Times reports. 47% of 104 hedge fund managers polled by TrimTabs and BarclayHedge in the last week said they were bearish on the Standard & Poor's 500 index, while about 17% respondents said they were bullish on the S&P 500, down from 34% a month ago, they noted. "The developments hedge fund managers are telegraphing bode ill for equities," BarclayHedge chief executive Sol Waksman said in a statement. US stocks are squarely in the red for the year after a recent drop on worries that the US economy is not growing as quickly as many investors had hoped only a few weeks ago. 

Hedge fund manager Lee Ainslie swapped a bet on one big bank for another in the second quarter, selling off all his shares of Bank of America Corp and investing in Citigroup instead, Reuters reveals. Ainslie's Maverick Capital was joined by a number of other top hedge funds that shifted dollars away from BofA and toward Citi in the quarter, potentially signalling a shift in fortunes for the two financial service giants. Shares of BofA have so far recovered far better from the 2008 market crash; however, the North Carolina-based lender's greater reliance on US-based customers may now be a disadvantage in light of the weaker US economic picture and tighter financial regulations, some analysts and investors said. 

Titan Capital Group, whose flagship volatility fund rose 21.6% as stocks tumbled in May, has raised bets on extreme market moves because investors’ views on the economic outlook have polarised, Bloomberg reports. The New York-based hedge fund, which manages about $400m, has added “a lot more” cheap, out-of-the-money options, betting the market is underestimating the likelihood of a crash, founder Russell Abrams said in a phone interview. Treasuries, German government bonds and Japan’s yen are pricing in economic outcomes that are bleaker than the stock market expects, said the former co-head of US equity derivative trading and convertible arbitrage at Merrill Lynch & Co. 

Third Point Partners, a $3.3bn fund managed by Daniel Loeb's Third Point, lost 3.5% in the second quarter, though the hedge fund manager said its funds are up 14%-16% so far this year on August's rebound, reports the Wall Street Journal. In an investor letter posted on website Dealbreaker.com, Loeb said the Third Point Partners fund was up 12.7% through June 30, outperforming the S&P 500 index's 6.7% decline during the period. Third Point said in the letter that its investment in chemical company LyondellBasell NV, which emerged from Chapter 11 bankruptcy protection 30 April under the control of a group of its lenders, had shed 28% in value in the second quarter.  "We eagerly await [Lyondell's] eventual listing on the NYSE, perhaps soon after Labor Day. Loeb wrote, adding that Third Point continues to hold Lyondell in its portfolio "in size." Lyondell's restructuring plan slashed its debt to about $5bn from $24bn. 

Hedge fund manager Steven Eisman is betting against for-profit college provider Strayer Education because the company’s federal student loan repayment rate is much lower than it claims, says Bloomberg. Eisman, who according to “The Big Short” by Michael Lewis was one of the few investors to profit from the collapse of the US housing market, said he initiated a new short position against Strayer because he agrees with the US Department of Education data that show the loan repayment rate of former Strayer students is 25%. The Virginia-based company has disputed the data and says its students’ repayment rate is 55.4%. “It’s a company that has been very successful in portraying itself as a high-quality company. I believe that’s just a lie,” Eisman said in an interview. “What they said was factually untrue.” 

LAUNCHES 
Hasley Investment Management's founding member Roderick Collins has been appointed to head up the Way Absolute Return fund, which was launched this month alongside the Way Freestyle Growth fund and the Way Asian Spice fund, reports the FT. The Absolute Return fund will invest in quoted hedge funds and investment trusts of hedge funds with a range of strategies, as well as in some distributor-status hedge funds and the growing range of absolute return funds available under Ucits III. "The central concept of the fund is to offer a diversified portfolio of absolute return vehicles, which are not dependent on the market-directional bets, which are the hallmark of long-only equities," said Collins. 

PEOPLE MOVES
Lakeview Investment Manager has hired Tony Lissuzzo from Man Group to help run the firm's investments in activist hedge funds, reports MarketWatch. In this role, Lissuzzo will be portfolio manager of the Lakeview Opportunity Funds and manager of due diligence. He will report to Richard Elden, managing partner of Lakeview funds and founder of Grosvenor Capital Management. Lissuzzo came to Man after the UK hedge fund giant integrated Glenwood, prior to which he also worked at DE Shaw, Bank One and Sirius Partners. Lakeview also announced that Frank Meyer, founder of Glenwood Capital, a leading funds of hedge funds business, has agreed to serve on its investment committee. Meyer was already a consultant to Lakeview. 

Investment firm EIM SA has hired Jan-Erik Frogg as president of its executive committee, reports Bloomberg. Frogg starts at the Switzerland-based firm on 1 September  and will report to the board of directors, EIM said in a statement today. He also will be responsible for institutional sales under Nicholas Verwilghen, who runs marketing and business development. Frogg in June left Union Bancaire Privée (UBP), where he was head of its hedge fund advisory business. He joined the firm from Agora Capital Management in Geneva in 2004 and before that worked at Goldman Sachs. in London. EIM, which Busson started in 1992, invests client money in hedge funds. 

Armajaro Asset Management has announced the appointment of Harry Morley as chief executive officer. He will be taking over the role from Richard Gower, co-founder of Armajaro, who becomes chairman of Armajaro Asset Management. Prior to the move, Morley had held the position of group finance director of Armajaro Holdings since 2008. Before joining the firm, he spent ten years working for a range of private equity backed businesses, and co-founded Tragus Holdings, the owner of the Café Rouge and Bella Italia restaurant chains, which was sold to Legal & General Ventures in 2005. “[Morley] has worked closely with Armajaro Asset Management as group finance director and as a member of the Armajaro Asset Management Risk Committee for the past two years,” said Gower. "[He] is ideally placed to drive the business forward."