Today's Top Stories Also Noted: Spotlight On... VC upbeat for exits, downbeat on economy News From the Fierce Network: Today's Top News1. John Paulson's struggles continue
These days, it's all about the silver lining for John Paulson's struggles. His flagship funds are suffering mightily this year, failing to reverse the misery he suffered last year. P&I puts a positive spin to this, noting that "Paulson & Co. Inc. is on track to survive a reversal of fortune that sources say very few other hedge fund managers could withstand." But perhaps the real silver lining is that "About 60%, or $12.6 billion of June 30 assets are from employees. Observers said it is impossible to know how much of that employee asset pool belongs to John Paulson, the firm's founder and president, but they speculate it is the vast majority. (By contrast, about 31% or 32% of Paulson & Co.'s assets are from institutional investors.) One source said the hedge fund manager's size at its peak — before the performance decline — combined with the high percentage of employee capital have insulated Paulson from the crippling impacts that performance declines of this size and client redemptions would wreak on other firms." And here's one more: "Two-thirds of assets are managed in three other strategies — merger arbitrage, credit and distressed equities — that have produced positive returns for the first half of 2012." The jury is still out as to whether or not Paulson can recover from this. It will be a long time before he can take performance fees, and that has to be weighing on him. For more: Related articles: Read more about: Hedge Funds 2. Columnist blasts Weill over comments
Sanford "Sandy" Weill shocked the world with his pronouncement that the time has come to break up big banks. After all, this is the man who is often considered the father of the financial supermarket, and who built a universal bank in the old Citigroup. So what was he hoping to achieve in calling for a break up of the biggest banks? The pronouncement on national TV has led to criticism, some of it extreme. Consider the views of columnist Charles Gasparino, who wrote the following in the Huffington Post: "It's hard to take Weill seriously. First this is a man with an ego the size of the bank he created. People who know him say he needs media attention like an alcoholic needs a stiff drink, and he's gotten precious little of it since retiring from the banking business six years ago. Yesterday made him feel like the same old Sandy again. Then there's his record as a banker, which should banish him from ever dispensing advice on the business he helped destroy." Ouch! Gasparino continues, writing that, "Citigroup wasn't just big. It was bad -- literally bad. The firm under Weill financed frauds like Worldcom and Enron without a second thought." He goes on to recount various transgressions involving former analyst Jack Grubman and Weill. "You can't make up this kind of sleaze," he adds, concluding that "Most other banks aren't doing much better, and they can thank Sandy Weill for showing them the road to ruination." Gosh Charles, tell us what you really think. Though in all seriousness, whether Weill intended it or not, the whole controversy over his comments has helped put the issue of big bank break ups right back on the map. Weill may be seeking some consulting business out of this. If that's true, some columnists will have a field day. For more: Related articles: Read more about: banks, break up
Suddenly, the idea of big bank break ups is back in vogue. A core group of bank critics have been pushing this line ever since the financial crisis erupted, bu the movement picked up an important supporter when Sanford Weill, the father of the modern banking supermarket, went public this week with his view that big banks should be broken up. One hedge fund manager, who specializes in bank stocks, voiced the guts of the issue when he told Reuters: "My gut says all these megabanks are worth more separately than combined." At a minimum, banks need to shrink, which they are doing. But the stock malaise has lasted long enough that boards will perhaps be less willing to give the idea of a more formal break up mere short shrift. Increasingly, analysts "say their top institutional clients are increasingly reluctant to invest in any bank stocks." Last week, hedge fund manager Bill Ackman said his firm sold its big position in Citigroup, "despite his general admiration for the bank's management, because the banking system has become too risky. JPMorgan Chase & Co's almost $6 billion of derivative losses and the Libor interest-rate-fixing scandal in the last few months proved to be the 'proverbial straw that broke this camel's back,'" Ackman wrote to his clients. You can only assign regulatory aggressiveness so much blame for woes of the industry. At some point, shareholders will tire of that line. We may be getting closer to the boiling point. For more: Related articles:
Read more about: banks, break up 4. A new star at Goldman Sachs
Goldman Sachs Treasurer Elizabeth "Liz" Beshel Robinson "took center stage" during a recent conference call with analysts and investors, to discuss the firm's fiscal health, the New York Post reports. The paper called the appearance "her first audition" for the job of CFO. The current CFO, David Viniar, was also on the call and helped field questions. "Robinson, who is married to Goldman Managing Director Samuel Robinson, shares several similarities with Viniar. Both held the treasurer job and worked their way up the ranks," the paper notes. "Robinson joined Goldman fresh out of college and has been steeped in the firm's culture. She earned her MBA at Columbia University at night while still working at the firm." She may well have been penciled in as the future CFO, so what does that tell us about the future of Viniar? The article suggests that he is keen to leave the bank once the roller coaster ride stops. That's a bit of a departure from the conventional wisdom that he aims to succeed his friend Lloyd Blankfein as CEO of the firm someday. That may or may not be in the cards, but as of right now, there is no indication that Blankfein will be announcing his departure anytime soon. If Viniar loses his bid to become CEO, he will likely move on. At that point, it's unclear whether Robinson, if she is perceived as a Viniar mentee, will be tapped for the CFO job. Her best bet is to hope that her current boss eventually moves up. For more: Related articles: Read more about: Goldman Sachs, CEO 5. Former Lehman president downsizes
Joseph Gregory, Lehman Brothers' former chief operating officer and president, seems to be downsizing, adjusting to a life that can no longer be financed by the firm's stock. He has listed his Long Island mansion for sale, according to Business Insider. The estate on the North Shore of Long Island "is situated on almost 10 acres with waterfront access, was custom built in 2002. It boasts six-bedrooms, eight full baths, two half baths and a seven car garage. The property also has a 15,000 square-foot main house and a 6,000 square-foot guest house, according to the listing. (The main house can be sold without the guest house)." Gregory famously used a helicopter and sometimes a seaplane to commute from this residence to Manhattan. It is unclear what Gregory is now doing professionally, or where he resides. At one point, he also owned a home in Manchester, Vermont, an apartment on Park Avenue and a home somewhere in Pennsylvania. If he's downsizing, he must think the market at the high end is strong enough to produce some strong bids. It will be interesting to see if he can sell this for what he wants. He's listed it at $22 million. For more: Read more about: Lehman Brothers Also NotedSPOTLIGHT ON... VC upbeat for exits, downbeat on economy Despite the Facebook IPO fiasco, a recent survey has found "renewed confidence in the exit market, despite the substantial decrease in the number of venture-backed IPOs last quarter," reports VB News. With that said, the industry is also more concerned about the economic malaise that seems to be spreading to Silicon Valley. In any case, this industry is nothing if not relentlessly optimistic. Article
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Friday, July 27, 2012
| 07.27.12 | John Paulson's struggles continues
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