Today's Top Stories Also Noted: Spotlight On... Hedge funds inflows rise in 2012 News From the Fierce Network: Today's Top News1. Blackstone sticking with SAC Capital
Embattled hedge fund firm SAC Capital, run by the controversial Steven Cohen, has gone to considerable lengths to keep limited partners on board. That effort seems to have borne fruit so far, as the fund firm has not suffered mass defections. The firm got some good news recently from Blackstone Group, one of SAC Capital's largest investors. According to Reuters, "Blackstone, which has $550 million invested with SAC Capital, is in no rush to redeem money from the Stamford, Connecticut-based hedge fund. Blackstone has had at least three discussions with the $14 billion hedge fund's executives about the insider trading investigation and talked to its own investors, which include state pension funds, endowments and wealthy individuals." The redemption situation is likely seen as fluid by some limited partners. Investors in SAC Capital have until the middle of February to decide whether to redeem funds. So it is possible that a trigger event will lead to a near-term redemption. Certainly, a major development like an indictment against the firm or founder Cohen could prompt many investors to act. One big issue as of now is whether public pensions will get nervous with their end investments in SAC Capital funds and demand portfolio changes in the funds-of-funds in which they have invested. Were it not for decent returns at SAC Capital, the decision to redeem would be a lot easier. For more: Related articles: Read more about: Hedge Funds, SAC Capital 2. Big market surprise coming in 2013
Can the bull market in equities continue at pace in the New Year? Optimism reigns in some quarters, despite a lot of current uncertainty abroad and especially at home, as the Fiscal Cliff drama plays out. It seems like a good idea to ring in the year with a dose of feel-good prognostication, for which I turn to the esteemed veteran strategist Lazlo Birinyi. He is "sticking to the bullish forecast he has given to clients of his Westport, Connecticut-based research firm since stocks hit a 12- year low following the credit crisis four years ago. The 69- year-old money manager says the bull market that began in March 2009 resembles advances that pushed equities up more than threefold in the 1980s and fourfold in the 1990s," notes Bloomberg. "The Standard & Poor's 500 Index will probably surpass its record high in 2013 as bears capitulate and the lure of a four-year bull market pulls 'everyone in the pool.' " His most interesting prediction is that the retail sector will have a change of heart about the stock market, giving up its recent reluctance and fear of rigged-systems to once again resume its traditional role as a big buyer of stocks. At some point, I too expect the retail sector to rotate back into equities. But it's hard to make the case for early 2013. That said, nothing will break down retail investors' fears of market structure inequities quite like massive returns. If the bull continues to run, they will come back. For more: Read more about: retail investors 3. Another housing abuse settlement to be revealed soon
Back in February 2012, the big five mortgage originators and servicers agreed to a $26 billion mortgage and foreclosure abuse settlement with state attorneys general, the Justice Department and the Department of Housing and Urban Development. That deal was hailed a definitive settlement that would allow big banks to finally put the sins of the past behind it, and stocks rallied on the news. But as it turns out, there were secret negotiations underway on yet another settlement, this one with the Office of the Comptroller of the Currency. Those negotiations were kept under wraps until just recently, when they were leaked to the media. As it turns out, a new settlement is expected soon between the OCC and 14 banks. This one seems even farther reaching than the last one, as $3.75 billion will likely go to people "who have already lost their homes, making it potentially more generous to former homeowners than a broad-reaching pact in February between state attorneys general and five large banks. That set aside $1.5 billion in cash relief for Americans," notes the New York Times. The $10 billion pact may be announced within a week or so. Of significant benefit to banks, the new settlement will effectively halt a mandate to review past foreclosures for possible wrong-doing. That effort, which was mandated by the Fed via another deal in April, has proven costly and time-consuming. Perhaps now we can declare that the major investigations into mortgage and foreclosure abuse at the retail level--though not the securitization level--are in the past. For more: Read more about: mortgage, Mortgage Settlement 4. Is Peter Madoff the worst compliance officer ever?
Peter Madoff, the younger brother of criminal mastermind Bernard Madoff, served as the compliance officer Bernard L. Madoff Investment Securities, where the massive Ponzi scheme took place over decades. Had Peter done his brothers' job, prosecutors say the scheme would have been cracked much earlier. To this day, and the amusement of skeptics, Peter maintains he did not know about the scheme. And in fact, prosecutors never charged him with being a knowing accomplice. But they got him on a lot of other stuff. He admitted in June to a range of crimes, including falsifying documents, lying to securities regulators and filing sham tax returns. He was recently sentenced to 10 years in jail, which compares with 150 years that his brother is no serving. Peter was also hit with a forfeiture request to the tune of $143 billion, which he'll never pay off. In a bid for lenient treatment, Peter's lawyers argued that he was in awe of his older brother, who treated him brusquely for years. Bernard was the "prince" of the family, while Peter was the mere pauper. In the end, can you imagine a worse choice for compliance officer? Then again, this is exactly what a criminal wants, a lapdog. Bernard didn't even allow Peter access to the mysterious offices of the money management unit two floors beneath the Peter's offices and the trading unit. It's hard to believe that he didn't at least have an inkling that something was amiss. Despite his obvious shortcomings, Peter was able to muster 63 character references for the sentencing hearing, compared with zero for his older brother. For more: Related articles: Read more about: Ponzi Scheme, Bernard Madoff 5. Vikram Pandit's parting gift
Just before Vikram Pandit was unceremoniously ousted as CEO of Citigroup, he made a big decision about the fate of the bank's hedge fund unit. Bloomberg Businessweek notes that his decision was sure to please some people that he's worked with for many years. "He agreed to give them most of it for free. While Citigroup is keeping a 25 percent stake, managers at the Citi Capital Advisors unit will pay nothing for the remaining 75 percent of that business as it becomes a new firm managing as much as $2.5 billion of the bank's money…The lender will pay the executives fees while gradually pulling out assets to comply with impending U.S. rules." This in response to the Volcker Rule, which limits bank investment in alternative investment funds. The biggest beneficiaries are Jonathan Dorfman and James O'Brien, "who once worked with Pandit at Morgan Stanley (MS) and are currently co-heads of CCA." They "will run the new entity. They will own about 25 percent of the firm. CCA portfolio managers and employees will share a 50 percent stake." If the deal proceeds, Dorfman and O'Brien could end up in charge of a firm valued by one estimate at more than $100 million. But whether this deal will go through in the face of public scrutiny is a fair question. Shareholders have a right to ask about the value of the spinoff to Citigroup shareholders and whether there was a deal that would have been more generous to them as opposed to bank employees. We might not have heard the last of this. For more: Read more about: Citigroup, Vikram Pandit Also NotedSPOTLIGHT ON... Hedge funds inflows rise in 2012 Hedge funds as a whole under performed in 2012, but they remain attractive to investors, who sunk $33.4 billion into these funds 2012, according to eVestment. That's about $10 billion more than in 2011 full-year net inflow. The industry now managed $2.6 trillion, which is just 13 percent below the record high set in the second quarter of 2008. If the industry could manage to perform better in 2013, the record is within striking distance. Article Company News:
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Wednesday, January 2, 2013
| 01.02.13 | Big market surprise coming in 2013
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