Hedge Fund/PE Basketball Game; Entire Event Raises Over $700K for NYC Youth

April 20, 2008 | 2 Comments

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This is good stuff and the kind of thing the mainstream press should note about the hedge fund industry: there is a lot of philanthropy and generosity!

 Last night, corporate sponsors, New York Knicks alumni and NYC high school basketball players came together for a night of basketball at the 2008 11th Annual Net Gain Tournament hosted by Youth, I.N.C. The tournament, which was held at the Park Avenue Armory in New York City, raised money for the organization Youth, I.N.C. Youth, I.N.C.’s Net Gain Program provides court time for high school basketball teams whose schools do not have gymnasiums and gives athletes the opportunity to participate in projects that help improve their communities. Over the past 11 years, the event has raised over $3 million and has provided basketball court time to more than 2,000 NYC high school students. More than $700,000 was raised for last night’s event.

The event kicked off with the second annual Hedge Fund vs. Private Equity All-Star game, featuring some of the most prominent names in the Hedge Fund and Private Equity community and coached by New York Knicks legends Allan Huston and Walt Clyde Frazier.  For the second year in a row, the Private Equity team beat the Hedge Fund team - final score was 32-24.

Additional tournament details and stats can be found directly below. Photos from the event can also be downloaded directly from: http://www.imagelinkphoto.com/youthinc.

2008 11th Annual Net Gain Tournament Stats:

Private Equity vs. Hedge Fund All-Star Game - For the second year in a row, Private Equity beats Hedge Fund 32-24!!

*    Private Equity team led by Ted Virtue, MidOcean Partners and coached by Allan Houston, New York Knicks alumni
-    Ted Virtue, MidOcean Partners (Captain)
-    Rob Berner, CVC Capital Partners
-    Ron Blaylock, GenNx360
-    Rick Schnall, Clayton, Dubilier & Rice
-    Jacob Capps, Lion Capital
-    Luke Long, Thomas H. Lee Capital
-    Rick Schifter, Texas Pacific Group
-    Michael Beal, Morgan Stanley

*  The Hedge Fund Team included:
-  Marc Lasry, Avenue Capital Group (Captain)
-  Ryan Renteria, Karsch Capital
-  Andrew Fishman, Schonfeld Group
-  Funsho Allu, AIG Investments
-  Steve Cronin, Schonfeld Group
-  Kyle Neptune    
-  Kevin Draughon

Half court shoot-out winner - Darius Garland from Jacqueline Kennedy Onassis High School

Round-robin tournament (24 teams playing on 6 courts throughout the night) final championship game:

*   Wachovia vs. Bloomberg & Crestview
*   WINNERS: Bloomberg & Crestview
*   Final score 26 - 22

First Houston Hedge Fund Round Table

October 23, 2007 | Leave a Comment

Last Thursday, we held our first Houston Hedge Fund Round Table meeting.  Actually, it was a pretty informal gathering of some very excellent minds I know of here in oil city.  Originally suggested by hedge fund manager, Eric Wormser of Starboard Capital, we assembled this intimate group to discuss business, hedge funds, trading, deals we have cooking as well as films, history, politics, etc.  We even talked a bit about the passing of Bob Denard, the notorious French mecenary who once ruled the Comoro islands.  We didn’t right the wrongs of the world, but we certainly had an entertaining and informative evening.  In all, we had a serial entrepreneur, natural gas broker, hedge fund manager, public funding professional from Bear, a financial consultant as well as Hedge Fund Launch.

Held at Bob’s Steak & Chop House, there was plenty of great steak and fine wine to be had.  We started off the evening with a nice, smooth sauvignon blanc — the name of which I cannot remember.  However, during the meal when conversation was at its peak and Sam Vogel (natural gas broker from South Africa) was telling us about some trades he’s been doing on Google, the wine was Diamant.  I’m told by our serial entrepreneur, Nita Miller, that the wine is crafted by a celebrated winemaker famous for making great, Bordeaux-styled, blended, red wines from Napa Valley.  I found it delicious and plan to buy a few bottles for the holidays.  It was very smooth.

Next time, I might reserve the private room so I can better lead the discussion.

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Hedge Funds + Social Media … a Seismic Shift

September 18, 2007 | Leave a Comment

I reported back after my attendance at Gnomedex in August that the social media phenomenon is already changing the way people do business. This announcement reported by Reuters today is evidence that it is, in fact, happening: 

Facebook and Accel (their primary VC firm) announced that they will launch a new fund, investing in companies that build applications on the Facebook technology. It seems that Facebook is moving beyond being simply a social networking site and morphing into a platform for developers — and they are putting their money where their mouth is.

Also, check out the September issue of Fast Company.  Robert Scoble discusses in his column why social media sites like Twitter are going to change business.

The question is whether the hedge fund industry is aware of this and ready for it?  In my opinion, established funds will be more apprehensive to embrace this new movement than thier start up counterparts — to their detriment.  Start up funds run by younger, savvy managers will know about this technology and use it to their advantage and gaining an edge.  Let’s list the ways:

– Raising capital:  This is a no brainer and anyone with any familiarity with Facebook can see the potential.  It may already be happening.  After Gnomedex, I understood the power of social media and how it can empower start up hedge fund managers to raise capital faster and more effectively by networking and getting the word out about their funds and expertise.

– Finding talent: fund managers will be able to find talented people with the necessary skills and motivation to work for them.  The days of the resume, as we know it, are numbered.

– Managing the business: hedge fund managers who embrace social media tools will be able to manage their funds better and from practically anywhere (remotely).  They will also be able to interact with administrators, prime brokers, investors more effectively.  The brighest of the bunch will be able to take this, combine it with the 4 Hour Work Week and apply it to their business.
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Hedge Funds + Subprime Collapse = Profits

September 4, 2007 | Leave a Comment

An interesting story from Fxtraders.eu (subscription required) … Evidently, while some hedge funds focused on mortgage backed securities have suffered losses (that have been duly noted in the press) related to the decline in the sub-prime mortgages space, many hedge funds have also been able to generate profits as a result of its decline.  Well, I must admit that I don’t mind pointing out that we told you so.  Consider what we blogged on July 19th:

So why is HFL jumping on the bandwagon with commentary on the sub-prime issue?  Well, it’s all about low hanging fruit.  As we have seen in the past with excessively oversold markets (e.g., distressed in 2002 and converts 2004 and 2005), the smart money is ready and waiting to buy at the bottom and reap years of rewards while the mainstream sits on the sidelines and licks their wounds inflicted by painful forced liquidations.  Consider this HFL’s call out to all players with experience in the sub prime sector: now is the time to start thinking about ramping up your own sub-prime vulture funds!  Whether you’re a victim of a downsized prop desk or a shuttered hedge fund, now is your chance to strike gold.

 It certainly seems that some hedgies positioned themselves well and are now benefiting from the subprime collapse …

In what has been the best short sale theme since 2002, many hedge funds have greatly benefited from the collapse in sub-prime mortgages via their short exposure to mortgage lenders and sub-prime mortgage backed securities and indices. While some have focused on shorting mortgage lenders and buying credit default swaps (CDS) on specific mortgage backed bonds, others have elected to purchase CDS on indices of these securities (the ABX series), with most focused on those securities issued in 2006 under more relaxed lending standards.

Even with some hedgies profiting from the subprime mess, you probably won’t see the mainstream press write about it much — at least not for a few more weeks.  Fortunately, investors can be smarter as we reported in July …

There will, however, be no shortage of astute investors that understand the signs of an oversold market and smell the opportunity for huge profits. 

Amen.
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Hedge Fund News: Friday, August 31

August 31, 2007 | Leave a Comment

There is a lot going on today with the subprime situation, etc.  So, for the sake of brevity, here are some of the more compelling headlines today …

• Dispelling the ‘Bin Laden’ Options Trades [theStreet]
• Star fund manager at Janus to leave the firm [financialnews-us]
• Barclays Rescues $1.6 Billion Cairn Capital Debt Fund [bloomberg.com]
• Citi Research Discusses a Dow Crash Scenario [The Kingsland Report]
• Risk of redemptions loom over 2,000 hedge funds [financialnews-us]
• Treasuries Tumble in Asia as Bush to Propose Subprime help [reuters]

 And for a bit of fun, our friends at Fintag have some scoop on the Wall Street sequel, Money Never Sleeps

Gekko is back – as a hedge fund manager.
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Hedge Fund Salaries and “Fairness”

August 30, 2007 | Leave a Comment

Dealbook reports on a couple of new studies that whine about hedge fund manager salaries being out of whack with the rest of the workers in the United States:

Last year, the top 20 hedge-fund and private-equity-fund managers earned more in 10 minutes than United States workers made the entire year, according to a report released Wednesday by two advocacy groups.

HFL says: Notice how these “advocacy” groups like to single out the top 20 hedge funds.  What about the other 8500 hedge funds out there?  Guess they don’t count.

According to the study, that dwarfs the discrepancy between chief executive officers and workers: Corporate chieftains, on average, earn about 365 times the average pay.

The Institute for Policy Studies is a nonprofit research group that promotes alternatives to the “corporate-driven approach to globalization.” United for a Fair Economy, based in Boston, “raises awareness that concentrated wealth and power undermine the economy” and corrupts democracy, according to its Web site.

HFL says: Let me clarify this for you … The Institute of Policy Studies and United for a Fair Economy are nothing more than socialist front groups determined to destroy the capitalist system.  Groups like this like to hide behind euphamisms.  It is always about promoting “fairness” and “preventing the corruption of democracy.”  But really its about taking your liberty and controlling how successful you can be.  No wonder they are out to get hedgies.

The study’s authors said top hedge fund managers are making more in a fraction of an hour than a typical worker makes in a year. According to the study, hedge-fund chiefs average $12.6 million a week, or $210,700 an hour based on a 60-hour week. That’s $35,100 every 10 minutes, compared with $29,500 a year for the average worker.

HFL says: Horror, the horror.  None of these nitwits can make over $35K per year.  No wonder their pissed off.  They want diamonds like Percy Walker has — Oh, but that would mean having to go out and earn it!  Nevermind.

Sarah Anderson, a director at the Institute for Policy Studies, supports a Congressional move to close the loophole allowing private investment managers to pay lower tax rates than ordinary Americans.

HFL says: Of course she does … because she’s a socialist.
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Oh Where oh Where Have all the IPOs Gone?

August 22, 2007 | Leave a Comment

With the exception of KKR Financial Holdings LLC’c (ticker: KKN) latest $230 million capital raise (which was actually not an IPO, but a follow on offering), the hedge fund IPO and public market activity seems to have come to a grinding halt.  Word on the street from a number of investment bankers specializing in this sector is that private market valuations are much more compelling and are likely to become even more attractive over the coming weeks.  As such, it’s pretty tough for the big boys to justify tying their money up in public offerings right now when there are a plethora of private market bargains to be had.  It seems there is at least one high profile hedge fund liquidation per week and no shortage of hedge funds and private equity players willing to come in and take over assets or inject capital.  Let’s not overlook the obvious: why not go to market with an IPO that’s sole purpose is to purchase assets and/or inject liquidity into floundering hedge funds?  Seems like the best of all worlds.  This would have to be a multi-billion dollar doozy of an IPO, however, in order to be executed with any success.  Could it be time for Blackstone’s IPO record to fall?
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How to Start a Hedge Fund: Part 4

August 15, 2007 | Leave a Comment

This is the final installment in a four part Q&A on “How to Start a Hedge Fund” with Jeffrey F. Kuchta, CFA, Managing Member of Hedge Fund Launch LLC

HFL:Should I just hire an internal marketing staff?

If you have a sufficient amount of operating capital, then it may make sense to hire an internal marketing staff.  The key point is that most dedicated internal marketing professionals will require a salary, benefits, as well as a percentage bonus based on the capital raised and retained.  For some start up managers this is not feasible, for others with an appropriate amount of operating capital, this situation is preferable as there is more internal control over the activities of the marketers.  Most mature managers eventually gravitate toward hiring and internal marketing and client services team as operating capital is less of an issue at AUM levels greater than $250 mil.

HFL: I generate spectacular returns, and that’s all investors should really care about.  Why should I provide investors any sort of transparency?

Kuchta: The days of attracting and retaining investors solely by providing a great monthly return stream are largely gone.  Given the increase in hedge fund frauds and operational-related blow ups over the last decade, individual investors, institutions, fund of funds, and consultants are requiring greater levels of transparency before considering an investment with a hedge fund manager.  Add the fact that you are a start up, and the required level of transparency will be significant. 

You also must understand that you may be one of a number of hedge funds in an investor’s portfolio.  Most astute investors these days are methodically risk managing their aggregate hedge fund holdings and rely on a certain amount of transparency in order to properly manage their exposures.

HFL: What sort of transparency might I be required to provide?

Kuchta: In the initial phase, most investors will require references, background checks, a standard industry due diligence questionnaire, some sort of proof of prior success, numerous phone calls to discuss your investment process, risk management and operations, and on site visits.  They may also want to speak with all of your service providers to confirm that they have been retained by you.  On an ongoing basis, it would not be out of the ordinary for investors to want quarterly (or more frequently) updates via phone, in person, and/or in writing. 

It is a good policy to formulate a monthly or quarterly letter that explains performance for the past period, the outlook for the near future, and any significant operational changes.  You should also include portfolio exposure information in the letter to keep the investors apprised of the portfolio make up and any significant shifts in exposures.  These sorts of letters go a long way towards keeping investors informed and happy, even if the news is negative.  Hiding negative news from investors always ends in disaster.

The times they are a changin’.  Competition amongst start up hedge funds is heating up and it really is a buyers market.  In other words, investors wield a big sword in this game and start up managers are going to be increasingly required to cater to investors’ wishes if they hope to have any success in growing their operations.

And That’s The Week That Was

August 14, 2007 | Leave a Comment

Attached/linked please find And That’s The Week That Was…the Brounes & Associates market/economic commentary for the week ended August 10, 2007.  The past week can be summed up in three simple words:  volatility, volatility, volatility.  These days, any session with less than a 100 point movement (on the Dow) in one direction or the other is considered a slow time in the markets (but would be more than welcomed by investors).  The week was highlighted by a Fed policy meeting (with a disappointing accompanying statement), additional subprime woes (with more big players being raked across the mud), and the continuation of earnings season (that no one seemed to notice).  Stay tuned…next week should prove to be equally fun (is that the right word?) as the inflation gauges will be subject to analysis and over-analysis.  (Anything to take attention away from subprime.) 

Coming up in the week ahead:  Retail Sales (Monday), PPI (Tuesday), CPI (Wednesday), Housing Starts (Thursday)

Fiddling while The Bear Burns

August 8, 2007 | 1 Comment

I can’t take it anymore!  I had every intention of not commenting about the Bear Stearns impolosion caused by their hedge funds, but James Cayne is a Wall Street Nero fiddling while his firm (Rome) burns to the ground!  And rather than be a man and take responsibility for this debacle, he offers up one of his own, Warren Spector,  for public ridicule and feeds him to the mob in the arena.   The Wall Street Journal article the other day paints the picture with wonderful, rich dark tones …

On Wednesday James Cayne, the 73-year-old chief executive of Bear Stearns Cos., summoned his top lieutenant to his smoky, dimly lit office in midtown Manhattan.

The big securities firm Mr. Cayne had led as CEO for 14 years was under attack. Two of its mortgage-related hedge funds had blown up, costing investors more than $1 billion, and its stock was under siege, down 27% this year alone. The way Mr. Cayne saw it, Warren Spector, Bear Stearns’s co-president and the person most often cited as his likely successor, deserved some of the blame.

Really? I can almost smell the stale cigar smoke, the whiff of which brings back the hazy memory of better times .  But good times these are not and its time for a scape goat.  Typical piss-poor management at it again.  Now, granted, Spector is a capital jackass as well.  Who the hell indulges himself to a bridge tournament while his business is in crisis?  Simple, an out of touch plutocrat.  Cayne deserves to be fired — and none too soon.  My prediction — it’ll happen within another two weeks. 

What do you think??

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